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Christopher Lewis

The US dollar had initially tried to rally during the trading session on Thursday but then turned around fall rather significantly to threaten the ¥103 level by the time New York jumped online. This point, it looks as if the US dollar is going to continue to drift lower, and even though this is a pair that typically rises and falls with risk sentiment, this is all about stimulus and the falling US dollar at this point. Bond yield differentials in the United States and Japan are not enough to keep the dollar floating against the Japanese yen these days, which is a bit of a departure from the last 13 years or so.

USD/JPY Video 18.12.20

It now looks as if we will probably break down below the ¥103 level, to go reaching towards the ¥102 level which has been my longer-term target. This does not mean that it will be an easy trade, nor does it mean that we will go straight there. This pair has been one that has been grinding lower, with an emphasis on the word “grinding.” We do the occasional pullback, but then again that offers significant value when it comes to the Japanese yen. With this being the case, we continue to look for short-term bounces to sell into, at the first signs of exhaustion.

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To the upside, the ¥104 level is massive resistance, so at this point I would consider that to be the “ceiling” in the market. The size of the candle does suggest that we should have some follow-through, so I do believe that it is only a matter of time before we drift much lower.

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

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