- The USD/JPY has rallied quite significantly during the trading session on Friday, showing signs of strength again.
- This is a market that’s been in a downtrend for quite some time, and therefore it does make a lot of sense that we continue to see this type of action.
- It’s also worth noting that the 50-Day EMA sits just below and has acted as a bit of a trendline.
If we can stay above that 50-Day EMA, then it’s likely that we will continue to see plenty of buyers, and I do think that’s going to be a case. Even if we did break down below there, I don’t necessarily think that the market is going to change directions immediately. The market breaking down below there then opens the possibility of testing something like the ¥142.50 level, which is an area that I think has been important multiple times.
Looking to Buy the Dip
The Bank of Japan continues to buy unlimited bonds to keep yield curve control in effect, so therefore they are essentially flooding the market with unlimited currency. If that’s going to be the case, then it does make a certain amount of sense that we would see the Japanese yen get hammered against almost everything. This is especially true against the Federal Reserve, since the reserve is extraordinarily tight with its monetary policy, and it is also worth noting that Wednesday features a rate hike coming out of America, but it also will have a statement and press conference that a lot of people will be paying close attention to.
I believe this market remains “buy on the dip” at least until the Federal Reserve changes its tune. There’s not a lot that the Japanese can do at this point, at least not until they either give up trying to keep interest rates down, which they have explicitly said that they are never going to stop, or the Federal Reserve stops tightening. It’s really that simple. Because of this, I try not to overthink this, I try to bind this market every time it offers a little bit of value and of course “cheap US dollars.” The market has been noisy, and the Bank of Japan has intervened a couple of times, but you’ll notice how every time they have, the market has bounced yet again.
Ready to trade our Forex technical analysis? Here are the best Forex brokers to choose from.