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Christopher Lewis
USD/JPY daily chart, December 21, 2018

The US dollar broke down rather significantly during the trading session on Thursday, slicing through the uptrend line, and the 200 day exponential moving average. At this point, it comes down to which side of this yellow box on the chart that  the market closes, as to what I would look for next. If we can get a rally and break above the ¥112 level, then we will probably get a bit of a rebound.

USD/JPY Video 21.12.18

However, if we break down below the ¥111.50 level, and close below it, I think that will be the beginning of yen strength that’s going into next year. This would be a major “risk off” move, and most certainly we have plenty of reasons to worry about risk around the world. Beyond that, the Federal Reserve has suggested that it is going to become more “data dependent”, which could work against the value of the US dollar in favor of the Japanese yen and its safety currency status.

For what it’s worth, I know a lot of my contemporaries believe that the Japanese yen will strengthen into 2019, and I think with all of the global risk out there, it would make a lot of sense. Ultimately, it looks as if the ¥114.50 level above has held as major resistance yet again on the longer-term charts. Pay attention, we could be seeing the beginning of a big move lower, perhaps down to ¥110, maybe even ¥108 after that.

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