The story of the day in North American markets was the renewed domination of the US Dollar which rallied against all the other major currencies today as a variety of factors helped the world’s reserve currency dominate. From strong employment figures in Initial Jobless Claims which reached a near 15 year low to US bond auctions that chipped in as well, the USD was on a roll. Even US equity markets joined in on the fun as a relatively subdued early session caught the rally bug in late trade to close in the green on the day.
With all of the USD love being bandied about, it would be hard to find an excuse to go against it. However, we all know that neither rallies nor swoons last forever, and they inevitably have to take a breather at some point. The USD/JPY, which surged through 120, had a particularly strong day which may very well last for a while particularly if you consider that the Bank of Japan could be introducing more easing measures in the near future. The diverging policies of the Federal Reserve (potentially raising rates) and the BoJ (potentially more QQE) make it a prime candidate for a long term “hold it forever” type of long term trade, but there could be some short term opportunities as well.
When looking at a 2 hour chart, there is a particular interesting level of potential resistance that could soon come in to play if this pair continues to rally in to the Asian trading session. The resistance, around 121.25, is a convergence of a couple of recent ABCD patterns, the 78.6% Fibonacci retracement of the 2015 high to the March low, and previous price resistance as well. If this pair can muster enough strength to get to that level, many of the USD bulls who helped get this pair higher could be looking to book a little profit. If that were to be the case, watch for that resistance to come in to play as it may fall back to the 120 level once again.
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