The USD/JPY pair continues to rise, as the interest rate markets continue to see rising rates in the USA.
USD/JPY
The U.S. dollar has rallied again during the trading session on Wednesday as interest rates in America continue to spike. Of course, the interest rate differential between the United States and Japan is wide enough to drive a truck through.
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This was predicated on the Iranian strike on a ship in the Strait of Hormuz, which has actually caused casualties at this point. News is still breaking on that, so whether or not that is something that escalates the situation, we'll just have to wait.
But when I look at this chart, it's not an overall surprise
After all, the interest rate differential has only continued to climb. Despite the fact that the market has seen intervention a couple of times from the Japanese, the reality is the interest rate differential continues to be a major driver.
You have to keep in mind that the Japanese have one of the highest debt loads in the first world. So really, at this point, you have to ask questions of whether or not they can continue to raise. The central bank interest rate decision recently was 7 to 2. It wasn't necessarily an all-hands-on-deck type of situation, so one has to wonder how much further they would go anyway.
The Federal Reserve, on the other hand, probably has to. With that, I think we are approaching this major trend line from previous trading. We'll see if we can break above it, but either way, this looks like a market that still has buyers on dips.
It's one I've been in for the better part of a year now, with the exception of closing out after the last sell-off. I'm now in it again. I've been collecting swaps all year, and quite frankly, it adds up over time.
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