US dollar initially rallies against the Yen only to turn around

The US dollar has fallen again during the day on Friday after initially trying to rally, but I think we are essentially trying to “feel out” the ¥109 level for support. Eventually we should get some type of stability, and then I believe that this pair will continue to go higher due to the interest rate differential and of course the attitudes of both central bank spirit the Federal Reserve looks likely to raise interest rates at least three times in the next year, while the Bank of Japan is light-years away from doing anything.

That being said, this pair does tend to fall in a “risk off” situation, so be careful about that. However, I believe that there is even more support below at the ¥107.50 level, so I think that the smart play is to simply wait for some type of “higher low” to start putting money to work again. I think that longer-term, the market breaking above the ¥111 level was the first shot across the bow, and the first signs that we will probably go to the ¥112.50 level over the longer-term. I don’t have any interest in shorting this market, at least not right now, as the US dollar continues to show strength around the world. Obviously, when it comes to the Japanese yen there are several other factors, but right now I think it’s best to err on the side of caution.