- In my daily analysis of major currency pairs, the USD/JPY pair is one that I always check right away, because it gives me a bit of a “heads up” as to how the US dollar is behaving overall.
- After all, the Bank of Japan can do very little in order to tighten monetary policy without wrecking the Japanese economy, so this is essentially a “low hanging fruit” for the greenback.
- The interest rate differential is massive between the 2 of these, and the fact that we pulled back a bit only to turn around and show signs of life suggests that the market is more willing than not ready to go looking at the ¥158 level.
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Going forward
Going forward, I believe that the trend will continue, and I think it’s only a matter of time before we break above the ¥158 level. If we can break above there, then it opens up the possibility of the market racing toward the ¥160 level, and therefore I am looking forward to that breakout to start adding to the position to the upside. That being said, if the market were to break down below the ¥155 level, then it’s possible that we could test the 50 day EMA. The 50 day EMA of course is an indicator that a lot of people will be looking for support, but all things being equal, this is a market that I think still has plenty of buyers in it regardless. The Bank of Japan will obviously make a few sounds here and there about trying to be strong, but anybody who looks through the situation for more than about 20 minutes can see that they are stuck.
At this point in time, I have no interest in shorting this market, and I do think the longer term we will eventually break to a fresh, new high, and the Japanese yen will be eviscerated from a longer-term standpoint. I don’t necessarily think that happens easily, nor do I think that happens in the short-term, but longer term I am definitely much more bullish on the greenback than the yen. For that matter, I am bullish on just about anything against the yen.
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