- The US dollar surged against the Japanese yen, breaking above 154.50 and testing 155 as bullish momentum remains strong.
- Supported by the wide interest rate gap, dips are likely to attract buyers, with long-term upside potential toward 159 yen.
The US dollar has rallied quite nicely during the trading session on Wednesday, breaking above the crucial 154.50 yen level and even testing the 155 yen level. That being said, I think we do have further to go, and it does make a certain amount of sense that we pull back slightly, but there are buyers underneath that I think continue to push this pair higher.
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Interest Rate Continues to Play a Part
The interest rate differential continues to favor the US dollar over the Japanese yen, and that won’t change anytime soon. Ultimately, I think you’ve got a situation where traders are looking for some type of reason to get long or perhaps even buy dips in order to hang on to a bigger move.
I do think we’ve got a situation where if we were to break down below the 153 yen level, then maybe we have to step back and let the market do its thing, wait for a bounce, and then get involved.
But right now, I don’t see any reason to short this market. I think you’ve got a scenario where there is just going to be too much bullish pressure at this point to consider trying to go against the overall flow of things. In fact, I think as long as we can stay above the 150 yen level, there’s a real world in which the US dollar is still going to rip to the upside. In fact, my longer-term target is closer to 159 yen, but it doesn’t have to happen overnight. Quite frankly, I don’t think it will. This is going to be more or less a grind, but you get paid at the end of every day to be on the long side of this trade.
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