- The USD/JPY spiked initially during the trading session on Wednesday but found the ¥145 level to be far too resistant.
- At this point, I really don’t know what it’s going to take the breakout, because Jerome Powell came out and said that he was going to raise rates as far as the eye can see.
- However, money managers in the United States seem to think that there was something dovish about that statement and push back.
My suspicion is that if and when we finally get the break above the ¥145 level, it’s likely that it will be brutal, and we could go much higher. In that scenario, I would anticipate that the Japanese yen has a couple of candles to go, perhaps reaching to the ¥147.50 level, on its way to the ¥150 level. I do think that is more likely than not going to be what happens, but it doesn’t necessarily mean it happens right away.
Looking at Pullbacks as Buying Opportunities
I think it’s a situation where you have a lot of noise that is going to be a significant part of this market, and therefore it’s going to be difficult because people still hope against reality that the US dollar is going to somehow pull back. Any pullback at this point in time should be thought of as a potential buying opportunity in an asset that has plenty of fundamental reasons to go higher. I think this is a situation where you have to look at it through the prism of value hunting, just as we have over the last several months. The yield differential will continue to favor the US dollar, but there’s not much more to say about this other than somebody out there is fighting like hell to keep the ¥145 level from being broken.
The ¥140 level D should continue to be supported; therefore, I think you should pay close attention to it. The market breaking down below that level could open up a lot of selling pressure, perhaps causing major issues. The 50-Day EMA could come into the picture at that point, and it’s likely that we would see a huge drop at that move. However, that seems to be very unlikely to happen anytime soon, so I would not be overly concerned about that.
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