Christopher Lewis
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The US dollar has gone back and forth during the trading session on Friday, as the ¥104.50 level seems to be somewhat interesting for traders. That being said, I do believe that the market is likely to see a lot of back and forth. At this point, it is trying to break down below the ¥104 level, which has been crucial support for some time. Looking at this chart, breaking down below the ¥104 level gives participants the possibility of a move down to the ¥102 level. This is an area where we had seen a massive bounce previously.

USD/JPY Video 26.10.20

Looking at the overall action, it does appear that the market has been forming a bit of a descending triangle, and therefore the measurement must be taken into account. For what it is worth, the measurement suggests that we could go down to the ¥102 level as well. It is because of this that I continue to fade this market, because I think it is a bit of a “lose-lose situation” when it comes to the dollar against the yen. Traditionally, this pair will fall if there is a major risk off type of event. However, it also may fall at this point due to stimulus expectations out the United States, thereby devaluing the greenback. Beyond that, we are simply in a downtrend so that is worth paying attention to as well.

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Any rally at this point in time will probably have to struggle with the idea of the 50 day EMA, which sits just above the ¥105.50 level. In other words, I like the idea of fading short-term rallies that show signs of exhaustion. We also have the ¥105 level which will cause a bit of psychological resistance as well.

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