The US dollar initially rallied against the Japanese yen, reaching towards the 107 handle, but then turned around to fall and form a shooting star. The shooting star sits just below the 107.50 level, an area that I think continues to be very important. If we can clear that region, the market should be able to go much higher, and perhaps reach towards 110 given enough time. Market participants have been very skittish as of late, but I think that we will eventually see buyers come back into this market, perhaps pushing to the upside given half a chance. In general, I believe that we will probably consolidate in the short term, followed by upward pressure. I recognize the 105-level underneath as being massive support. A breakdown below that level would be very negative indeed. At that point, I would anticipate a move down to the 100 level.
The Australian dollar had a noisy trading session on Tuesday, reaching towards the 0.79 level, rolling over to sell off rather drastically, and then rallying again to finish the day relatively unchanged. To me, it looks as if the 0.79 level will offer a significant amount of resistance, but if we can break above there, I think the market can go looking towards the 0.0 level next. This market is highly influenced by gold and of course risk appetite, so pay attention to both. If stock markets start to rally, that typically will help the Australian dollar, but even more so would be gold markets rallying again. At this point, I believe that we will eventually break out to the upside, but we may need to pull back in the short term to build up the necessary momentum. Either way, it’s going to be noisy.