The US dollar has rallied again during the day on Friday as we continue to see the USD/JPY pair rally rather significantly. We broke above the ¥137 level at one point during the day on Friday but gave back a bit of the gain as this is an area that’s been focused on previously and offered a certain amount of downward pressure then. Looking at this chart, it’s obvious that we are getting just a little bit extended, but I think the trend is still very bullish.
The 50 Day EMA sits at the ¥134 level and should continue to attract a lot of attention in and of itself. Even if we break down below there, then the ¥132 level is an area where you would expect to see a lot of support also. This is a market that I think continues to see a major move to the upside given enough time, but this will also be dependent on the bond markets in general. After all, the interest rate differential between the 2 countries continues to be quite wide, and therefore it makes quite a bit of sense that people would favor the greenback.
Is USD/JPY a good pair to trade now?
On the upside, the ¥140 level is an area where you would expect to see a bit of psychological resistance, and it looks like we are going to try to get there eventually. If we break above that level, then obviously that would be a very bullish sign. The US dollar has gotten quite strong over the last couple of days, so it’s not a surprise to see it do the same thing over here.
The Bank of Japan continues to work against interest rates and that country, trying to keep the 10-year yield at 0.25% or below. They are essentially “printing currency” every time they buy bonds, and therefore it makes sense that more supply would be negative for the value of the Japanese currency.
- The US dollar is the favored currency around the world, while the Japanese yen is one of the least wanted.
- This is essentially the “perfect storm” for market conditions as they stand right now.
- It’s not until we break down below the ¥130 level that I would be concerned about the overall trend in this pair.
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