The US dollar rallied a bit against the Japanese yen during the trading session on Wednesday, as we have broken above the ¥106 level. Ultimately, this is a market that I think does face quite a bit of resistance just above, especially near the 50 day EMA. Furthermore, the ¥106.50 level is an area that has seen a lot of selling pressure as well. After that, we then have to deal with the ¥107 level, followed by the ¥107.50 level. In other words, looking at a short-term chart and seen signs of exhaustion is the best way to get involved and start selling again. After all, the US dollar is falling for a reason, and that reason is Jerome Powell.
The 50 day EMA just above probably causes enough reason for the market the pullback, and most certainly we have a lot of potential noise coming out during the jobs figure on Friday, so I think it is only a matter of time before we roll over. Being patient and waiting for an opportunity as the best thing I think you can do in this market, and you have to pay attention to short-term charts. We have a clear range between the ¥105 level on the bottom and the ¥107 level on the top in general, so you simply must play the market that you are given. To me, I think it is relatively obvious that this is the case going forward.
Whether or not we can break out of this range is a completely different question, but at this point, one would have to pay quite a bit of attention to the Federal Reserve and the Bank of Japan, as they both are trying to do everything they can to loosen monetary policy. That being the case, this is more or less going to be a central bank barometer essentially, and therefore I think you have to pay attention to overall sentiment more than anything else. I would not look for some major move in the short term, as the market simply has nowhere to be based upon the fact that these are two very dovish central banks. If anything, I probably favor a move lower, but it is difficult to imagine what the catalyst is quite yet. This pair does tend to chop around a lot at times, and this is one of those times.
