The USD/JPY pair fell during the course of the month of April, but only slightly so. Quite frankly, we have been grinding sideways for about two months now, and we are approaching an uptrend line. The question is now whether or not that trend line holds. I personally think it will, and I believe that the Japanese yen will continue to be shorted overall. With that, I’m personally short of the Japanese yen, but not in this particular market. I have been short of it against high yielding currencies, and will continue to be so. However, that of course will eventually have a knock on effect in this market is up enough people were going when I am.
Going forward, I think that we will test the 103 level, and then ultimately the 105 level. To be honest, I’m a bit surprising we haven’t gone higher yet. However, it’s quite easy to see that this pair has been grinding higher over time, so I still believe that the uptrend is in full effect. Reaching the 105 level really wouldn’t be that big surprise, we’ve been there before.
Bank of Japan continues to work against the value of the Yen.
The Bank of Japan continues to work against the value of the Yen anyway, so there is a huge part of me that feels that this market is going to continue to respect its wishes, given enough time. The real question of course is can the US dollar beat up on the Japanese yen? In my opinion, yes. However, I recognize that the interest rate differential isn’t enough to get too many currency traders excited, and what we really need to see is a rate hike in order to get this pair moving drastically.
However, when you look at the 10 year notes of both countries, it just rates in the United States have risen a bit. There has been a tapering off of quantitative easing, and that will ultimately favor the US dollar of the Japanese yen anyway. Going forward, I anticipate that the month of May will be good to the buyers, but it may be based on short-term trades.
