The US dollar has initially tried to rally during the trading session on Thursday but then turned around at the ¥107 level to fall rather precipitously. The candle stick from the trading session is starting to look very much like a shooting star, so I think we are going to continue to reach lower. The ¥105 level is an area that has offered a lot of support, so I think at this point we are going to retest that level.
Keep in mind that the 100% Fibonacci retracement area is just below there, and as we are well below the 61.8% Fibonacci retracement level, it makes sense that we would then go down to the 100% Fibonacci retracement level as per usual. If we can break down below it which is just below the ¥105 level, then this market is ready to go much lower. I think at that point we would probably target the ¥102.50 level.
If we can break down below there I think that the market goes to the ¥100 level. At that point I suspect that the Bank of Japan will probably continue to monitor markets and perhaps try to intervene at one point or another. Because of this I believe that the ¥100 level is essentially going to be the beginning of the end of the downtrend, but we aren’t there yet. In the short term I like the idea of fading rallies as they occur, because we just can’t keep gains in this pair right now. As long as that’s going to be the case then I think people will continue to look for safety in the form of the Japanese yen, as we have seen on this chart.
Great trade opportunities are waiting – don’t wait to profit from this pair!
The alternate scenario of course is that we break out to the upside. I don’t think that’s going to happen but if we do see some type of US/China trade relations positive momentum, then this pair could rally rather significantly. We would need to clear the ¥107 level decidedly in order to take advantage of that. Until then, I would assume that rallies are to be faded, but if we do make that break out it could send this market much higher as it would have been a combination of a massive bullish candle in that a breakout above it. Expect volatility with a slightly negative tilt.
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