The US dollar has rallied again during the day on Tuesday, but keep in mind that this market is testing a major resistance barrier. There is a short term consolidation area between ¥112 on the top, and ¥115.50 on the bottom. Beyond that, we have a huge amount of order flow at the ¥112.50 level, so while this pair does look very bullish, in need some type of catalyst to continue going higher.
From simple observation, it appears that this pair is moving right along with the S&P 500, something that has historically been quite common. Over there, the 2820 level has offered a massive amount of resistance that we can’t get above. I think at this point this will be a coordinated effort. The Japanese yen will sell off if the stock market breaks out, sending this pair higher. However, if we see the S&P 500 roll over and show signs of concern, we will more than likely see this pair break down a bit. For what it’s worth, it seems that the last couple of days has simply been a lot of back-and-forth trading, and therefore I do believe that a lot of traders out there are trying to figure out which direction to go right now.
I don’t think that this pair is going to go higher based upon itself. While the US dollar has been relatively strong against many other currencies around the world, the Japanese yen has a whole host of other reasons that it moves. In this pair, if the S&P 500 rolls over, and we break down below the ¥111.33 level, I would be interested in selling. Otherwise, if the S&P 500 breaks the 20/20 handle, and we clear the ¥112.50 level over here, I am more than willing to start buying again but I recognize that it will be very choppy above that level as there are several minor resistance barriers.
