The US dollar has rallied again during the trading session on Friday, breaking above the top of the neutral candle stick for Thursday, which of course is a bullish sign. However, longer-term we have to look at the totality of the picture, and therefore I think the upside might still be somewhat limited.
The US dollar has broken higher during the day on Friday, clearing the top of the Thursday candle stick which was very neutral. This is a strong sign, but when I look at the longer-term charts, I can clearly see an area above that should cause quite a few problems for the buyers. The ¥110 level of course is a large, round, psychologically significant figure. Beyond that, the 61.8% Fibonacci retracement level is just above the ¥110 level. The 50 day EMA is approaching that area as well, so I think there is a nice confluence of selling pressure there just waiting for the market to come back to it.
At that point, I would anticipate that the market will probably go back to the ¥108 level. That being said, I think that the market will probably continue to see a lot of selling pressure longer-term, because quite frankly the Federal Reserve is looking more dovish in general and that should weigh upon the US dollar. I’m going to look for a daily exhaustive candle closer to the ¥110 level to start selling, because quite frankly after the massive selloff that we had seen, it would make sense that eventually the selling pressure would come back. This has been a massive rally, but in the end most of the issues out there still remain. Most of the pundits on Wall Street are looking for a stronger yen this year anyways because of the various issues globally.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.