The US dollar has rallied a bit during the trading session again on Wednesday as we continue to see the Japanese yen get crushed. After all, the Bank of Japan continues to see a lot of problems in the bond market, as they are trying to figure out how to keep interest rates down to 0.25% on the 10 year note. While they can do that, they cannot have a strong currency at the same time. This is because when you buy “unlimited bonds”, it’s the same thing as printing unlimited currency.
At this point, it’s very likely that we have a situation where the US dollar will continue to strengthen due to the Federal Reserve tightening its monetary policy, especially as inflation is raging in the United States. There have been rumors that the Bank of Japan has stealthily intervened in the Forex markets recently, and even in just the last 24 hours. It’s obvious that it is not working, and it seems like there’s almost no reason to believe that the trend is going to change anytime soon.
- I like the idea of buying dips, because it offers value in a massive uptrend.
- Because of this, we’ve got a situation where there is no way to short this market, at least not until the fundamental situation changes.
- That would take the Federal Reserve changing its overall attitude, and thereby loosing monetary policy or at the very least pausing.
- It’s obvious that the Bank of Japan is not going to stop fighting raising interest rates, because I don’t think they can do to the massive amount of debt that the country has piled up.
We have seen officials recently reiterate the desire for yield curve control in Japan, so therefore I think it’s probably worth noting that the Japanese yen stands no real chance outside of massive intervention. The last time the Bank of Japan decided to step into the market with all guns blazing, they wasted 15% of their FX reserves in order to cause a short amount of pull back, only to see the market break massively higher from there. I have no interest in shorting this market, and I just don’t know what changes without the central banks doing something at this point in time.
Ready to trade our daily Forex analysis? We’ve made a list of the best brokers to trade Forex worth using.
