The US dollar has fallen hard against the Japanese yen during trading on Tuesday, as we continue to see the greenback get hammered. It is very likely that we will continue to go even further to the downside, as we are approaching the ¥105.35 level. If we can break down below the impulsive candlestick to the upside from about two weeks ago, meaning that we break down below the ¥104.30 level, this market will more than likely become unraveled. One thing is for sure, by the end of the trading session on Tuesday, we have made a series of dent into this area of support.
The US dollar is losing ground against multiple currencies around the world, mainly due to the Federal Reserve and its monetary policy of ultra-loose money. As long as that is going to be the case, this pair will gain even though the Bank of Japan is extraordinarily loose as well. Because of this, it is only a matter of time before we focus on the US dollar itself, which is exactly what we have seen over the last three days. The fact that the last three days have white down about six green candles tells you that there is much more momentum to the downside. In the short term, we may get a short-term bounce, but I would be more than willing to sell that market on signs of exhaustion.
If we do break down below the recent lows, it opens up the door to the ¥102 level, possibly even the ¥100 level over the longer term. To the upside, I not only see the momentum of the last several days as a sign of extreme resistance above, but I also believe that the 50 day EMA, painted in red on the chart, as it has already shown itself to be important and it is a very common indicator for the people to pay attention to. With all that being said, I am looking for short-term rallies to sell or break down below the bottom of the candlestick for the trading session on Tuesday. I have no interest whatsoever in buying this pair, regardless of what the risk appetite might be out there. Because of this, I believe that eventually, we will have a significant break down that could lead to a nice longer-term trade.