As already noted in today's two previous articles on the euro and the pound, bulls on the US dollar can bring the past week to their asset. The main driver for strengthening the US currency was the protocols of the US Federal Open Market Committee (FOMC), which did not exclude the possibility of reducing asset purchases in the second half of this year or somewhat closer to its end. As for investors' appetite for risky operations, it was practically absent at the auction on August 16-20. Investors were concerned about the situation in Afghanistan and the continued spread of the COVID-19 delta variant. The possibility of introducing new restrictions in China, whose economy is the second in the world, has become especially alarming. If restrictions are imposed in China, this could significantly cloud the prospects for the global economic recovery from the consequences of the COVID-19 pandemic. Since these two currencies are protective assets or safe-haven currencies, let's move on to the price charts, where a very interesting situation has developed. Let's start with the results of the past week.
Weekly
A candle with equidistant and sufficiently long upper and lower shadows perfectly demonstrates the market sentiment regarding the choice of a safe-haven. Since both currencies (the Japanese yen and the US dollar) are such, it was quite difficult for market participants to give their preference to one of these protective instruments. In this situation, the strengthening of the dollar was associated with more hawkish FOMC protocols. From the technical side, we again have to turn our attention to the red line of the Tenkan of the Ichimoku indicator, which acted as a strong resistance and dropped the price after the pair reached the mark of 110.25. The situation for the bulls on the instrument is aggravated by a strong and extremely important technical and psychological level of 110.00 for market participants.
This mark has been repeatedly written about, and I do not see the point in repeating it. I will only note that it is extremely difficult and problematic to gain a foothold under or above this level. It has happened more than once that after fixing above or below 110.00, the quote again returned above or below this important mark. At this stage of time, 110 yen per dollar is a strong resistance. And taking into account the maximum values of the previous trades, we will designate the resistance zone of 110.00-110.25. A confident breakdown of the red Tenkan line and consolidation above 110.25 will allow moving to higher prices. And it is not a fact that after that, the exchange rate will not return under 110.00. Strong support is located in the price zone of 109.00-108.75, where the current lows of this month and the blue Kijun line.
Daily
On the daily chart, after a more than confident exit down from the Ichimoku cloud and consolidation below, a pullback followed to its broken lower border and attempted to return the price to the cloud limits again. What these attempts ended up with is visible on the price chart – huge upper shadows of several candles. At the same time, the resistance is provided by the Tenkan, the lower border of the cloud itself, the 50 simple moving average, and the level of 110.25. I believe that until all of the above is broken and the pair is fixed higher, it is impossible to count on further growth. I prefer sales in the current situation, but only if there are bearish reversal patterns of candle analysis on this or smaller charts in the price zone of 110.00-110.25. As for potential purchases, we keep the support zone near 109.00 in focus and, when appropriate signals appear, we try to buy.
