- The USD/JPY has fallen a bit during the trading session on Wednesday in an almost exact copy of the previous 24 hours.
- The ¥136 level has offered support, and now it looks as if we are going to continue to see people pay close attention to that area.
- If we continue to see that area hold, then I think it’s probably only a matter of time before the US dollar takes off against the Japanese yen. This makes a lot of sense, considering that the Bank of Japan continues to buy “unlimited bonds” in order to keep the 10-year yield down to 0.25% or lower.
The last couple of days have been relatively quiet as the world awaits the Jackson Hole Symposium to get done. The Friday morning session features Jerome Powell giving a speech at 10 AM Eastern Standard Time, meaning that the world is going to listen to determine whether the Federal Reserve is going to become extraordinarily hawkish, or if they are going to pivot. Wall Street has gotten into its head that the Federal Reserve is going to pivot, but quite frankly they have said multiple times since then that the markets have misread the central bank. In other words, we are playing a game of chicken.
Look For Buying Opportunities
At this point, I think dips continue to offer buying opportunities, especially with the 50-Day EMA underneath and rising. I do think that we eventually get to the ¥140 level because the Federal Reserve is going to be extraordinarily aggressive, as the inflation numbers in the United States measure 8.5% year-over-year. This is more than 4 times what the Federal Reserve aims for, so they will have to do everything they can to beat the economy down in order to drive down demand. As long that’s going to be the case, it’s difficult to imagine a scenario where this pair does anything different unless the Bank of Japan finally gives up its quantitative easing, something that it is not going to do anytime soon. The trend should remain, but the next 24 hours might be a bit quiet as we wait for some type of confirmation. With this being the case, the trend should continue to be followed.
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