The US dollar initially tried to rally against the Japanese yen during the trading session on Thursday but turned around to fall again as we have seen a lot of volatility in this pair. As we head into the weekend, it does make sense that we would see a little bit of back-and-forth. Ultimately, the markets will see some support near the ¥105 level, from where we have bounced previously. Ultimately, this is a market that I think will see a lot of choppiness, but as the US dollar has been negative for a while now, and I think that will continue to show itself over here. With that being the case, I do not have any interest in trying to buy this pair.
To the upside, I see the 50 day EMA as significant resistance, and even though we had a very bullish candlestick during the day on Wednesday, it looks like we will eventually find plenty of sellers. In fact, it is not until we clear the 200 day EMA, extensively the ¥107.50 level, that I would consider buying. Not only do we have the 200 day EMA up there but we also have a lot of recent resistance. Because of this, there is a pretty high bar for me to start buying this pair, even if the stock market start to take off which typically will push this pair higher. This tells me that this is all about the US dollar right now, and not much else.
All things being equal, I do believe that even though the Japanese yen is considered a safety currency just as the US dollar is, the US dollar is being sold off so drastically that the pair will probably fall, even as stock markets rally. The breaking of the recent low near the ¥104.30 level would open up the possibility of a move down to ¥102, perhaps even down to the ¥100 level. I expect a lot of volatility in this pair, but that is nothing unusual. It certainly looks as if the market is just grinding away to the downside and that should continue to be the case. However, if you are looking to short the US dollar you may have a little bit more momentum and other currencies that tend to be more attractive than the yen when it comes to risk taking.
