The US dollar rallied again on Monday against the Japanese yen to go looking towards the ¥115 level. This is interesting considering that we are in a very thin part of the year, but nobody seems to care here. The Japanese yen has been sold off against multiple currencies, so it could be repatriation at this time of year to companies back home as well. Either way, it looks like we are hell-bent on trying to get to the ¥115 level, an area that has been important multiple times in the past, so if we can break through, it it would make a bit of a statement. In fact, it could lead to a bigger “buy-and-hold” type of set up for next year.
If we cannot break out, then expect a pullback to look for support, maybe even as low as ¥112.50, where we have a lot of structural support. Either way, I am not looking to short this market, because it has been so resilient in its march higher, and of course the yen has been getting beat up by just about every currency out there. With this, even if you do not trade this pair, you need to pay close attention to it because if you choose to trade something else with the yen in it, this can give you an idea as to what the “relative strength” of the Japanese yen is going to be.
I suspect that the next week or so might be an attempt at a breakout in a pullback, only to stabilize a bit and then make another surge higher. If we start seeing a lot of risk being put on in the markets when traders come back from the holidays, that will almost certainly kick off a “buy-and-hold” scenario here. That seems to be the way markets are lining up in general, like we are going to go “risk on” in January, so that could be reason enough to make this move happen. Keep in mind that this pair does tend to grind quite a bit, so you may have to be patient; but at the end of the day, there is nothing on this chart that looks even remotely bearish at this point, and I would need to see the market break down below the 200 day EMA at the very least to go looking for it.