- The USD/JPY rallied a bit early during the trading session on Tuesday, but it looks like the giveback was rather quick as we have run out of momentum. That’s not a huge surprise, because quite frankly the recent selloff has been quite drastic.
- We are sitting right around the 200-Day EMA, which of course is a major indicator that a lot of people pay attention to.
- The impressive candlestick for Monday of course does suggest that maybe we could go a little higher, and a break above that candlestick opens the possibility of a move toward the ¥140 level.
Keep in mind that this pair has sold off quite aggressively, so even if we were to take off to the upside, it makes a certain amount of sense that we would see a bit of a struggle. All things being equal, it’s likely to see a situation where we would have a lot of volatility and therefore you should probably keep that in mind if you do put a position. Pay close attention to the interest rate markets because market is highly influenced by them. Looking at the situation, I think that the risk to reward certainly favors buying, but we need to interest rate market to behave and work with it.
BoJ’s Policy Favors the Dollar
On the other hand, if we were to break down below the lows lastly, it opens the possibility of a break to the ¥132 level, followed by the large, round, psychologically significant figure of ¥130. Anything below there would almost certainly be a major trend change, but now it would take a lot to make that happen because even though it has been very negative as of late when you look at the longer-term charts you can see that the Japanese yen is still down about 15% for the year. That is a big yearly move regardless of how it happens.
Keep in mind that the Bank of Japan continues to do everything it can to loosen monetary policy and keep those interest rates in 10 years down. By doing so, they must print unlimited yen, which has a lot to do with why we are seeing the Japanese yen lose value.
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