The US dollar pulled back a bit during the trading session on Friday as we head into the weekend. The ¥105 level is trying to offer a bit of support, just as we have seen it do in the past. However, we have broken through there are a couple of times and it is likely that we will probably do so again. This is due to the fact that there are two major drivers of this currency pair most of the time, and that is risk appetite and the 10 year yields of both countries.
USD/JPY Video 19.10.20
The market has been grinding lower for some time, and now that we are reaching towards the ¥105 level multiple times. We have seen the market go as low as ¥104, and I do think that it is probably where we end up going towards again. Looking at this chart, I also see that the 50 day EMA has offered significant resistance, and that it extends all the way to the 200 day EMA above there. In fact, that is a major “zone of resistance.”
If we were to break down below the ¥104 level, then it is likely that we will continue to see a market reach towards the ¥102 level. The market had seen a major bounce from there previously, so I think that might be the longer-term target. In fact, you can make an argument that we are forming a descending triangle, and that descending triangle actually measures for a move down to ¥102 level if you protect the trendlines going forward. Ultimately, the grind lower favors the Japanese yen for not only the possibility of stimulus in the United States, but also the fact that the bond markets are seeing more of a return in Japan.
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