With a bit over 24 hours left in the forex week, the Greenback has had a rough four days vs the majors. The EUR/USD (+0.57%) and GBP/USD (+0.58%) have trended higher, while USD/CHF (-0.23%) and USD/JPY (-0.79%) have moved lower. For now, it’s possible that the U.S. dollar has already posted its high water mark for 2021. 

On the news front, U.S./Russia/Ukraine geopolitical strife is negatively impacting the USD. About an hour ago, POTUS Joe Biden decided to hit Russia with a fresh set of sanctions. Here’s the latest:

• The U.S. formally named the Russian Foreign Intelligence Service as being the culprit behind the SolarWinds hack.
• 10 Russian diplomats are to be expelled from Washington, D.C.
• New financial restrictions targeting Russian sovereign debt are being put into place.

Today’s sanctions come on the heels of yesterday’s posturing from the U.S. State Department in response to Russia/Ukraine military escalation. Since the announcement, safe-havens are up, led by gold (+1.88%) and the USD/JPY (-0.18%). Are investors already pricing-in the potential for armed conflict on the Russia/Ukraine border?

A Rough Two Weeks For USD/JPY Bulls

2021 has been a decent year for the Greenback as values have rallied from 2020’s plunge. USD/JPY bulls are the primary beneficiaries, gaining more than 500 pips. However, it appears as though the tides are beginning to turn.

Here are two levels that will be on my radar in the weeks to come:

• Resistance(1): 2021 High, 110.96
• Support(1): 38% Retracement, 107.76

Bottom Line: If tensions continue to grow between the U.S. and Russia, the USD/JPY is likely headed much lower. Under this scenario, a buying opportunity may come into play from the 38% retracement. As long as 110.96 is 2021’s high, I’ll have buy orders in the queue from 107.79. With an initial stop loss of 107.46, this trade produces 25 pips on a sub-1:1 risk vs reward management plan.