The US dollar has rallied a bit against the Japanese Yen during the trading session on Tuesday, as we continue to see a lot of noise in this market. It does make a certain amount of sense though because we are trying to figure out what the Bank of Japan is going to be doing going forward. After all, they continue to put a cap on the interest rates in the 10 year bond. They suggest that they are willing to buy “unlimited bonds” in order to keep the 50 basis point ceiling in the market, so therefore every time that the bond market start to sell off, they will have to come in and buy bonds, essentially printing Japanese yen along the way. That is exactly what happened during last year, as they had initially set a target of 25 basis points or lower.
USD/JPY Technical Outlook Today
- Looking at this chart, the 200-Day EMA sits right around the ¥135 level, and we have the 50-Day EMA falling to reach out towards that area.
- Ultimately, if we get that cross it would be the so-called “death cross.”
- I don’t necessarily trade based upon that indicator, but some longer-term position traders will.
At this point, I think the one thing you can probably count on is going to be a lot of choppiness, and that there should still be supported underneath, extending down to the ¥130 level. The ¥130 level of course is a large, round, psychologically significant figure, and an area where we have seen some action in the past. As long as we can stay above the ¥130 level, that it’s possible that we could continue to turn things around, but if we do break down below that ¥130 level, we can see the bottom fall out.
Keep in mind that the Consumer Price Index comes out on Thursday, it will have a major influence on what people think that the Federal Reserve will do going forward, so that obviously is a major influence on what happens here. Furthermore, you need to pay attention to bond markets overall, because as worldwide yields rise, that will put more upward pressure on yields in Japan, therefore force the Bank of Japan to jump in and print more yen. In the short term, volatility is almost assured and expected.
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