The US dollar has broken down below the psychologically and structurally important ¥110 level during the trading session on Thursday, perhaps in reaction to Japan closing down yet again, and talking about no spectators for the Olympics. If that is going to be the case, then traders are focusing on the idea of the Delta variant taking over and perhaps heading back into a lockdown situation. Quite frankly, I think it is something a little bigger than that but that is the narrative I am hearing on the newswires today.
When you look at this chart, you need to zoom out to a much higher timeframe because you will notice that between the ¥111 level and the ¥112 level there is a massive amount of resistance, so it is not a huge surprise to see that we have pulled back. Whether or not we are going to break down further is a completely open question, but it certainly looks as if we have a bit of a “risk off” move just waiting to happen and the size of the candlestick certainly suggests that we probably have further to go. In
To the upside, we need to recapture the top of the candlestick for the Thursday session for me to become impressed, and quite frankly that would be a bit surprising to me. I think it is much more likely that we go looking towards the 200 day EMA underneath which is currently hanging around the important ¥108 level. At that level, I would reevaluate the entire trend.