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Christopher Lewis
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USD/JPY

The US dollar has rallied a bit during the trading session on Tuesday, reaching towards the 50 day EMA. The 50 day EMA is an indicator that a lot of people have been paying attention to for the last several months, as it is dynamic resistance. The fact that the candlestick broke above the ¥105.50 level suggests that perhaps there is more of a “risk on” feel to the market during the day, but we have seen this happen multiple times and therefore it is only a matter of time before we probably rollover again. After all, the US dollar is still in the crosshairs of potential stimulus, so that in and of itself could cause the greenback to pull back a bit.

USD/JPY Video 21.10.20

Ultimately, this is a pair that seems like it is trying to build up the necessary momentum to finally break down below the ¥105 level. Breaking down below there opens up the possibility of a move down to the ¥104 level, followed by a break down to the ¥102 level. With the bonds in Japan offering more yield than in the United States, that is another reason we have been seeing this market drift lower.

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That being said, there are a lot of questions out there as to whether or not we are in a “risk on” or possible “risk off” type of environment, so that will continue to cause issues. That being said, I have found the easiest way to trade this market lately has been to simply short signs of exhaustion on smaller time frames for smaller positions.

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

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