- In my daily analysis of major currency pairs, the USD/JPY pair has been interesting to watch, as we initially tried to rally, but then gave back the gains fairly quickly.
- This has been a fairly choppy situation during the day, but it also makes sense that the Martin Luther King Jr. Day Holiday has a major influence on what’s going on, as North America is essentially shuttered. While it is an American holiday, the reality is the United States represents most of the North American volume.
Technical Analysis
The technical analysis for this pair is rather bullish, and it’s worth noting that the 50 Day EMA sits just below the ¥155 level and is rising. We have tested this over the course of the last couple of trading sessions, and it looks like it is trying to hold. In fact, it’s probably worth noting that we are bouncing a bit from the lows of the session, so I think you will continue to see a lot of people watching this pair for the idea of a continued interest rate differential that is favoring the greenback.
The ¥155 level has been important multiple times, and it now offers a significant amount of support. The ¥158 level above is a significant support, and I think we will bounce around between now and the announcement from the Bank of Japan on Friday about the interest rate situation there. All things being equal, I think this is a market that will continue to favor the carry trade overall, but the Japanese may shake things up on Friday with their press conference or the rate decision. Nonetheless, regardless of what they do, the interest rate differential between the two currencies will continue to favor the US dollar over the longer term. Because of this, I am more than willing to buy dips.
Going forward, I think this is a market that will eventually break out to the upside, unless of course something drastic happens in Japan. If we were to break down below the ¥155 level, then it’s possible that we could drop down to the ¥153.50 level, a minor support level in the past.Top Regulated Brokers
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