USD/JPY
The USD/JPY pair had a pretty volatile session on Monday, as we initially tried to fall but then turned back around to test the 118 handle. There was a significant amount of resistance there, so I feel that this market will continue to bring in sellers until we get well above the 118.50 level. In fact, I feel it’s not until we get all the way above the 119 level that you can comfortably again to start buying this pair.
While the US dollar is definitely king at the moment, keep in mind that this pair tends to follow risk appetite in general. Right now, there isn’t much in the way of risk appetite as you can see in the stock markets. With this, I feel that this market should then reach towards the 116 level given enough time.
AUD/USD
The AUD/USD pair tried to rally as well, but struggled just above the 0.70 handle. That area cause enough trouble to turn the market back around and form a shooting star though, and as a result I believe that the Australian dollar will continue to sell off. The gold markets haven’t been helping the Aussie lately, and as a result I believe this is probably more of a reaction to what’s going on in China than anything else. The Chinese markets continue to fall, and as a result the Australian dollar should continue to fall as well as it tends to be a bit of a proxy for the Chinese economy.
I think the markets are looking at the 0.69 level, and trying to define whether or not that support is going to hold. I do not think it will, and at this point in time I would start selling rapidly below there. On the other hand, if we rally at this point in time, I think there should be plenty of selling opportunities on signs of exhaustion, especially off of short-term charts.
