- The US dollar and Japanese yen have been engaged in a back-and-forth battle around the ¥142 level in recent trading sessions.
- This level has proven to be a tough nut to crack, with an uptrend line offering additional support just below it. However, the 200-day Exponential Moving Average above is acting as a barrier, preventing a clear breakout.
- The fate of this currency pair hinges on what unfolds in the coming days.
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If the USD/JPY exchange rate manages to breach the 200-Day EMA resistance, there is a strong possibility of a significant upward movement. Traders could set their sights on the ¥145 level, which holds considerable psychological significance. Beyond that, the ¥147.33 level will be a key zone to watch closely. However, the situation remains uncertain, and we must exercise caution as the lack of liquidity could also be a major issue as there won’t be a lot of traders wanting to jump in.
The Bank of Japan Will Determine What Happens Next
The upcoming major catalyst for this currency pair is the decision by the Bank of Japan (BOJ) regarding interest rates. The markets are eagerly awaiting the BOJ's stance on rate normalization. Should they choose to normalize rates, it would undoubtedly impact the Japanese yen significantly. As of now, we are left in a state of speculation, trying to anticipate the BOJ's actions.
In the absence of clear guidance from the BOJ, the USD/JPY exchange rate is likely to continue its back-and-forth pattern as traders attempt to establish a solid base. This uncertainty is compounded by the fact that we are entering the year when liquidity tends to become a major concern. Consequently, market participants should brace themselves for erratic price movements.
At the end of the day, the fate of the USD/JPY exchange rate remains uncertain as it hovers around the ¥142 level. The 200-Day EMA is currently acting as a formidable barrier to further gains. The upcoming decision by the Bank of Japan regarding interest rates will likely be the driving force behind any significant moves in this currency pair. Until the BOJ provides clarity, traders should exercise caution and closely monitor the market's behavior. Additionally, the year-end period may introduce further unpredictability, making it essential to stay vigilant while trading this pair
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