The USD/JPY pulled back on Tuesday after failing near ¥160. This area continues to be paramount in this pair.
USD/JPY
The US dollar has found itself pretty soft against the Japanese yen during the trading session on Tuesday as we tried to break above the crucial and well-defined resistance barrier in the form of 160 yen. But as rates started to drop in the United States, that really put a dampening effect on this rally.
Ultimately, I think that makes a lot of sense. And with the 4.30 level being threatened, I think it makes a certain amount of sense that we might see the US dollar struggle to break above that 160 yen level, at least cleanly in the short term. Keep in mind that a lot of what we are seeing is reactions to the latest headlines coming out of the war in the Middle East and whether or not we are likely to see some type of peace agreement.
Middle East Headlines and Risk Appetite
The Iranians did suggest that they were willing to sign some type of secession to the conflict, but they wanted certain guarantees and now we're just waiting to see if that is in fact going to be offered. It'll be interesting to see if that happens because I think that changes everything. At that point, you could be talking about a scenario where the bulls and pretty much all risk assets start to take over. That should bring the US dollar down.
It's worth noting that the US dollar is threatening one of the biggest levels, at least, close to threatening one of the biggest levels on the chart going all the way back to 1990. So, in this environment, I do think it remains a buy on the dip scenario, but the 158 yen level needs to hold for the time being. I'm waiting to find a little bit of a drop and then a bounce that I can take advantage of.