Potential signal:
- I’d be a buyer of this pair if we can break above the ¥156.50 level, with a stop loss at the ¥155 level.
- If we can get above the ¥158 level, then I think the market goes looking to the ¥160 level.
The US dollar rallied significantly during the trading session on Tuesday, as we recovered from the massive selloff that we saw on Monday. Most of the selling pressure on Tuesday was complete nonsense, as it to do with DeepSeek wiping out a lot of the so-called “carry trade” where people are borrowing in cheap currencies to buy a ton of technology stocks. All things being equal, this is a market that has nothing to do with that, and now we will start to focus on the fact that the interest rate differential most certainly favors the US dollar.
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Federal Reserve
The Federal Reserve has a meeting on Wednesday, and I think we have a situation where buyers are going to continue to jump in and try to take advantage of the swap at the end of each day, as it will continue to be wide enough to drive a truck through. All things being equal, the market has recently seen the Bank of Japan suggest that they were somewhat neutral when it comes to their monetary policy, despite the fact that they did raise rates. The Federal Reserve is likely to stay put, so that means that we will continue to see a lot of buying pressure. With that being said, I think that you have a scenario where we should continue to rally, but we could get a bit of volatility during the Jerome Powell press conference.
The 50 Day EMA has attracted a certain amount of attention, but I think the fact that the adults came back into the market to start buying what’s the big move are here. Whether or not the Federal Reserve changes its tune remains to be seen, but I think at this point in time you have to assume that the situation in the US economy will continue going in the same direction it has been, and that should continue to keep the Greenback strong.
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