USD/JPY
The USD/JPY pair fell significantly at first during the day on the day, but turned back around to form a bit of a hammer. The hammer of course is a very bullish candle, so it does attract my attention right away. However, we are bit extended at this point so breaking back down wouldn’t be a huge surprise to me. I believe that buyers below will more than likely continue to be attracted as the Bank of Japan is going into negative rates, so the US dollar should continue to do well against the Yen. Beyond that, the US dollar is a safety currency although not normally thought of as such against the Yen itself. But in this particular circumstance, it seems to be that is the thinking of traders around the world. I believe that the market will find support near the 118.50 level, and that is essentially the “floor” in this market.
AUD/USD
The AUD/USD pair broke higher during the course of the session on Monday, clearing the top of the hammer that had formed. Because of this, it’s very likely that the market should continue to go a little bit higher. However, there is an uptrend line from previous trading that should now be resistance. Because of this, I would not be surprised at all to see some type of exhaustive candle between here and there, and that of course would get me selling right away. In fact, that is exactly what I expect to see at this point in time as although gold markets rising, Asia is still something that people are concerned about and of course the Australian dollar does get punished as a result.
On the other hand, if we can break above that uptrend line, I feel that this market will continue to go much higher as the momentum will have picked up quite significantly in order to do so.