The US dollar has initially tried to rally during the course of the trading session on Friday but then turned around at the ¥111 level. By pulling back the way we have, the market is staying within the channel, as the market has seen the overall channel hold for quite some time. All things being equal, that means that we could pull back towards the ¥110 level, possibly even the ¥109.75 level. Furthermore, we could have possibly made a bit of a “double top”, as the ¥111 level was resistive previously. Furthermore, we also have the MACD showing signs of divergence, so at this point in time we could see a little bit more negative attention.

USD/JPY Video 28.06.21

However, the 50 day EMA is also reaching towards the uptrend line that makes up part of the channel. With that being the case, if we were to break down below the 50 day EMA it is very likely that we could go looking towards the ¥108 level. The ¥108 level is also backed up by the 200 day EMA, so it is very likely that we would see support there. Breaking down below that level would be massively negative and could send this market into a bit of a tailspin. I do not expect to see that happen, but it is very likely that we would see a lot of headline risk out there being priced into the market if it does in fact happen. With that being said, I think that we do have a bit of a pullback coming, and quite frankly that makes sense from a historical standpoint, but at the end of the day I would be very cautious about buying up here.

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This article was originally posted on FX Empire

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