The US dollar has plunged during the session on Thursday to reach down towards the 50 day EMA. That being said, the 50 day EMA should cause a little bit of a reaction and at this point in time we are probably oversold. Furthermore, we are entering the “golden pocket” on the Fibonacci retracement tool, meaning that we are between the 50% level and the 61.8% level. There are a lot of traders that will pay close attention to this area, so be interesting to see whether or not we get buyers in this area. If we break down below the 113.80 level, then I would consider all support broken, and this market could fall quite significantly.
USD/JPY Video 14.01.22
On a bounce, I would need to see the market take out the highs of the Thursday candlestick to get bullish again, although the longer-term trend certainly does favor buying. Keep an eye on the 10 year yield if it continues to fall that will almost certainly work against the value of this currency pair. That being said, the US dollar needs to recover against multiple currencies to make this pair bounce, or we need to see some type of major selling of the Japanese yen. While the Japanese yen has been rather soft, the reality is that the US dollar has been even softer. In general, this is a market that looks like it is trying to figure things out, but clearly you cannot jump in and try to catch this falling knife right away, and I do believe that it is more likely than not going to be a market you need to observe more than anything else.
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