Friday has seen a little bit of US dollar weakness against the Japanese yen, but nothing that suggests the market is changing.
USD/JPY
During the Friday session, we've seen quite a bit of selling pressure, but we're still well within the range that we had been in for several days. All things being equal, this is a pair that I look at little dips like this as potential buying opportunities.
And now it looks like we are threatening the 162 Yen level. The 162 Yen level, for me, being broken to the upside opens up an even bigger move. And I do think that ultimately that's what happens. We had recently broken through a swing high from 1986.
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Interest Rate Differentials and Key Levels
Ultimately, if we do fall from here, and I think we will occasionally, the 160 Yen level will be targeted as a potential buying opportunity, as it was previously massive resistance. The 50-day EMA is right there as well, and therefore, I think we've got a scenario where if we do drop, we are likely to get involved and start buying. If we break the 162 Yen level, then it opens up the possibility of a move to the 164 Yen level.
All things being equal, this is a situation where traders continue to take advantage of the interest rate differential, and I think that will be the story here for some time. Traders are expecting the Federal Reserve to raise rates twice between now and the end of the year. I don't know if that's actually going to happen but it certainly puts this in one direction.
Furthermore, you get a lot of upward momentum due to the idea of getting paid at the end of the day, and therefore, I just continue to add to an already existing position. I have no interest in shorting this USD/JPY pair, and even if the Bank of Japan did get involved and started intervening, that's just going to have me buying again later down the road, as we had just seen at the end of April.
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