US dollar bouncing around against Japanese yen

The US dollar has been very noisy during the trading session on Tuesday, as we continue to find buyers on dips. Keep in mind that the headlines coming out of both the United States and China involving trade will continue to be a major move or of this market, as the USD/JPY pair is so highly correlated to risk appetite. I believe that the stock markets will continue to influence where this pair goes, so as the S&P 500 rallies, so will this pair. If we can break above the 107.50 level, the market is likely to test the 108-level next, and a break above there should open the door to the 110 handle.

The 106.50 level underneath is support, and I think that it’s not until we break down below there that I would be willing to sell. Even then, I think it’s a short-term selling opportunity at best, and even when we get that happen, I think it’s only a matter of time before the value hunters come back into this market. The 105-level underneath is the total “floor” in this market, and if we were to break down below there it would probably take some type of catastrophic event, such as a major escalation in the trade war between the United States and China. Ultimately, I don’t think that is what’s going to happen, and I think that buyers will eventually prevail, but it’s going to be a very noisy ride, so I would keep your position size very small.