- The dollar/yen has shown itself to be very strong and we finally broke through the 150 yen resistance barrier.
- This is an area that traders have been paying close attention to for some time and the CPI numbers coming out hotter than anticipated was the last straw.
- We finally broke through. So, with that being said I think short-term pullbacks will continue to be buying opportunities as they have been, but now we also have some momentum.
I anticipate that the USD/JPY pair probably goes looking to the 155 yen level over the longer term which is the next major psychologically important figure. The 152 yen level now should, at least in theory, be a support level that a lot of people will be paying attention to. After all, there should be a lot of market memory in this area.
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If we were to break down below there, I think the bottom of the uptrend is still at the 150 yen level where the 50 day EMA is hanging around. I have no interest whatsoever in trying to get too cute with this. I've been long of this market for some time, continuing to collect swap. That's what I've been doing for weeks on end now and I plan on doing that for quite some time going forward. Yes, the Bank of Japan very well could try to jawbone this thing back down. They can only do so much and if they did intervene, I would just wait for things to cool off and start buying again as this is a cyclical and perhaps even structural problem that the Japanese have.
Remember, the debt levels in Japan are astronomical, and are even more aggressive that even the United States, and therefore it makes a lot of sense that the Bank of Japan cannot do much, other than the occasional lip service for the idea of being fiscally responsible. That being said, as long as the Federal Reserve has to fight inflation, its difficult to think this market falls for any real length of time.
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