- The USD/JPY initially fell during trading on Tuesday but found buyers underneath to reassert the overall uptrend.
- At this point, it’s likely that the US dollar will continue to get plenty of buyers due to the Federal Reserve monetary policy being tight, and more likely than not remaining so.
- With that in mind, I think this is a situation where you need to look at it through the lens of the longer-term trend, with the 50-Day EMA underneath offering a lot of support.
The overall attitude of the market has been one that every time it drops, there will be buyers jumping in to pick up bits of value. The longer-term trend does suggest that we are revisiting the ¥150 level given enough time, and then possibly breaking above there. When we do, then it’s likely that we see the market truly break out, perhaps pressing the nerves of the Bank of Japan yet again. It’s obvious now that the Bank of Japan cannot have it both ways, they need to either allow the again to depreciate over the longer-term or give up yield curve control.
Looking to Buy the Dip
Remember, every time they step in to buy unlimited bonds, they are essentially printing unlimited yen. This has been an absolute train wreck for the Japanese yen, and it shows just how “stuck” the Bank of Japan is now. They have a lot of concerns at this moment, and I think that’s going to continue to be the way going forward, they will have to give up one to gain the other. The only hope for this pair is going to be at the Federal Reserve finally pivots.
The jobs number known as JOLTS came out during the session on Tuesday, showing that there are over 10 million unfilled jobs in America, meaning that inflation is probably going nowhere. If is going to be the case, the Federal Reserve is going to remain resilient in its hawkish behavior, and the Bank of Japan will be on its own. With this, I look at any dip as an opportunity to pick up US dollars “on the cheap.” Eventually, the market will break to a fresh, new high, although the Bank of Japan has been trying to talk the market down for days.
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