The USD/JPY rallied a bit during the trading session on Monday, but you should keep in the back of your mind that it was Labor Day in the United States, and a certain amount of liquidity was probably missing from the Forex markets. This is a market that has been bullish for quite some time, and I just don’t see that changing anytime soon.
The Bank of Japan continues to be very dovish and is fighting interest rates rising in that country. This is essentially the same thing as printing currency, while at the same time the Federal Reserve is likely to continue tightening monetary policy. Ultimately, this is a market that will eventually take all of that into account, which is likely to be the next factor in this market, pushing the US dollar much higher. The fact that we are above the ¥140 level is a very strong sign as well, so a certain amount of psychology comes into play at this point.
Market Likely to go Higher
- Any dip at this point will more likely than not be a buying opportunity, and although we have broken above the ¥140 level, it would not be a huge surprise to see the market break down there as well. That does not mean much as we are in such a strong uptrend.
- The 50 Day EMA is sitting at the ¥136 level and rising, and now should offer a significant amount of dynamic support.
- At this point, the market continues to find plenty of reasons to get long, and I think that will continue to be the case if the 2 central banks are going to do the same action.
In fact, it’s not until we break down below the ¥132 level that I would be a seller, and even then, I would probably have to see what’s going on from a fundamental standpoint. Ultimately, this is a market that now it has found its strength above the ¥140 level and should continue to go much higher. The size of the candlestick is not necessarily overly impressive, but considering it was a holiday that should not be a huge surprise either. This is a market that I think given enough time, we will go much higher based upon simple momentum.
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