- The US dollar initially plunged against the Japanese yen during the Monday session and what has been a very volatile trading environment.
- We have turned around completely to reach toward the ¥150 level, an area that is a large, round, psychologically significant figure, and an area that I think a lot of people will be paying close attention to.
- After all, it’s been important multiple times, and it is worth noting that “market memory” suggests that we will have to revisit it again.
For what it is worth, the 50 Day EMA was at the top of both the Thursday and Friday candlesticks last week, and that’s where we have fallen from. After that, we have the 200 Day EMA offering resistance, and if we can break above that, then I think this is a market that truly starts to take off to the upside, perhaps opening up the possibility of the US dollar recovering quite drastically against the Japanese yen.
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Bank of Japan
Keep in mind that the Bank of Japan is a major mover here, because quite frankly the inflation numbers in the United States continue to be a little stubborn and sticky, and this could continue to be a significant driver of where the US dollar goes. After all, the Federal Reserve finds itself in a situation where the government numbers are starting to show that inflation is stickier than once thought, but at the same time, there’s also the possibility of a short-term recession.
On the other side of the Pacific, the Bank of Japan has suddenly seemed a little bit more dovish than they once were. Because of this, we could very well see the Japanese yen get sold off against multiple currencies, but it is still early days in this situation, so what I need to see is a little bit of momentum to convince me that I should in fact start buying the dollar in shorting the Japanese yen. The alternative of course is that we break down below the bottom of the candlestick from the Monday session, which almost certainly drops this pair down to the ¥147 level.
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