The US dollar broke higher during the trading session on Tuesday, reaching towards the ¥105 level in order to fill the gap. By filling the gap, we now are starting to look at significant struggle just waiting to happen.
The US dollar rallied rather significantly against the Japanese yen on Tuesday, wiping out the losses from the Monday bloodbath. Ultimately though, we ended up filling the gap, which you would expect it to do. The gap also has offered quite a bit of resistance, just as the ¥105 level would. Ultimately, the question now is whether or not we can break above that level with any type of daily close. If we can break above there, then it could open up the door to the ¥107.50 region. However, there is another case scenario as well.
If we rollover from here and close below the 100 for yen level, it’s likely that the market will reach towards the ¥102 level which was the close from the Monday session. Underneath there, the ¥101 level gets targeted, and then the Bank of Japan will certainly start to pay close attention. They do have a history of intervening closer to the ¥100 level, so it’s likely that level will be a huge level that the market will be paying attention to. All things being equal, it’s very likely that the market will be volatile to say the least, and probably move on the latest headlines involving coronavirus, what the US government is going to do, and then of course central bank intervention around the world. Because of this, you should keep your position size relatively small, at least until we get more confidence in one direction or the other. Unfortunately, the markets are still going to be extraordinarily noisy.
