US dollar rallies against Japanese yen during the week but fails to hold gains
The US dollar initially rallied during the week, breaking above the ¥110 level but then turned around of form a bit of a shooting star. That of course is a negative sign, but we have a massive hammer underneath that should continue to support this market. I think we are looking at a market that’s good to be difficult to deal with longer-term, because I anticipate that we will go back and forth in the short term, creating a lot of volatility. If you are a longer-term trader, you should be somewhat encouraged by the recent bounce from the uptrend line, but you should also be very small in your position sizing as the volatility could cause major issues.
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If the market was to break down below the hammer from the previous week, the next major support level is the ¥107.50 level, which has been significant resistance in the past. Beyond that, we have a major uptrend line underneath that should continue to define whether this market could go higher. However, I think that you need to pay attention to geopolitical headlines, as that is one of the bigger drivers of this pair. If we can stay out of a major trade war and could even get news that was positive from conversations between North Korea and the United States, that could be reason enough for this pair to continue going higher. Beyond that, we have higher interest rates in the United States that should continue to provide an upward proclivity as well.