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Christopher Lewis
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The US dollar initially tried to rally during the trading session on Tuesday but then gave back the gains to slice through ¥109 level. This is a market that continues to be very noisy, but at the moment it looks as if there is plenty of support underneath, so I think this is simply going to be a bit of a buying opportunity. After all, the Japanese yen is getting hammered against almost everything over the longer term, and with that being the case I am looking for signs of support and perhaps long wicks to the downside that tell me it is time to get long again.

USD/JPY Video 19.05.21

When you look at the longer-term charts, you can see that we had bounced from the 38.2% Fibonacci retracement level, which sits just below the ¥108 level. With this being the case, the market has then recovered, and it simply has been chopping and what could be thought of as a “ascending channel.” All things being equal, it is not until we break down below the hammer that was the swing low that I would consider shorting. If that is the case, then we probably have a run into the Japanese yen for some type of safety trade as the Japanese yen tends to be thought of as the “risk off currency” for a lot of traders out there.

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One of the main drivers at this point seems to be interest rates, and the fact that we are seen a major divergence between the bond yields of both countries. As long as it continues to spread in favor the United States, that should drive this pair higher.

For a look at all of today’s economic events, check out our economic calendar.

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