- The USD/JPY saw a slight pullback on Thursday, but there are still buyers willing to pick it back up.
- As a result, it is likely that the uptrend will continue, with the area below the ¥132.50 level drawing interest.
- If the market were to break down, there is significant support near the ¥130 level that should offer a short-term floor.
The Bank of Japan's yield curve control policy, which keeps the 10-year JGB at 50 basis points or lower, puts pressure on the yen whenever interest rates rise. As a result, yen-related pairs typically go higher. While the market will continue to look to the upside, if we were to break down below the ¥127.50 level, it would change everything and potentially open up a big move to the downside.
It is essential to recognize that the market will continue to be volatile, and you need to be cautious with your positioning size to protect against this volatility. The bond markets show no signs of settling down, making it necessary to stomach a lot of volatility. Thus, you will have to be very careful when positioning yourself in the market.
The Market is Likely to be Noisy
In terms of technical analysis, the 50-Day EMA sits around the ¥133.50 level, which could be a short-term barrier. However, the overall market trend will continue to move with the bond markets and interest rates. Therefore, it is essential to keep an eye on these factors and their potential impact on the US dollar.
Overall, the market is likely to be noisy, and it is crucial to be cautious when trading. As always, position sizing is important to manage the risk effectively. While the market trend is currently to the upside, it is essential to keep an eye on potential resistance levels, such as the 50-Day EMA, and support levels, such as the ¥130 level, to determine future market movements.
Potential signal: When looking at this chart, you should also keep an eye on the ten-year Japanese Govt Bonds. The higher that rate rises, the higher this pair will go, in anticipation of BoJ printing. On a move above the ¥133 level, it’s very likely that the market will make an attempt to reach the ¥135 level. Potential stop-loss orders could be placed near ¥132.
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