The US dollar fell a bit during the course of the trading session on Monday, breaking down towards the ¥109.50 level, only to turn around and show signs of life. As we have bounced significantly, the market looks as if it is trying to form a bit of a hammer. That is a very bullish sign, but we also have recently struggled at the ¥111 level, which of course is an area that I have mentioned more than once as significant resistance. Furthermore, the MACD shows divergence, which is also another reason to suspect that we might be running into a little bit of trouble.
USD/JPY Video 22.06.21
Underneath, the 50 day EMA sits near the ¥109.25 level, and that could offer a little bit of dynamic support. That being said, if we break down below it, we could go looking towards the ¥109 level, perhaps even below there to go looking towards the 200 day EMA. The 200 day EMA would of course be very crucial to pay attention to but what I think at this point we are looking at is a market that is trying to determine whether or not a longer-term “double top” has been put in the case.
All things being equal, I think that we will see a lot of noisy behavior, and at this point in time I believe that the ¥111 level is a major resistance barrier that will be very difficult to overcome, so at this point in time I think we continue to chop around and perhaps see more pressure building up for a potential pullback based upon the historical value of the area as a ceiling.
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