The US dollar has rallied significantly during the course of the trading session on Thursday to show signs of life again as we are sitting just below the 50 day EMA. The 50 day EMA is somewhat sideways, as the ¥110 level is also a large, round, psychologically significant figure. This is a market that has been consolidating for quite some time, and therefore I think it makes sense that we stay in this range until something big happens. Keep in mind that this pair tends to move on the interest rate differential more than other once, so you will have to pay attention to the 10 year notes from both countries.
USD/JPY Video 17.09.21
To the upside, the ¥110.75 level is an area that has offered significant resistance previously, so if we can break above there then obviously it would be a very bullish sign. Nonetheless, if we rally from here, it is more likely than not that we would see exhaustion near that area. To the downside, the ¥109 level would more than likely offer significant support, as it has previously. Furthermore, the 200 day EMA sits in that general vicinity, and that will offer quite a bit of interest.
At this point, the market is likely still just going to do the same thing is done over the last several months, as we really have no catalyst to get moving in one direction or another. However, if we do break out of this consolidation area, then it would make its directionality known from a longer-term standpoint, but that being said, I think you need to let the market tell you which direction wants to go before putting serious money into it, unless of course you are a short-term range bound trader.
For a look at all of today’s economic events, check out our economic calendar.