- USD/JPY slipped after an early Thursday rally attempt as traders positioned for a possible Federal Reserve rate cut next week.
- Despite short-term pressure, the broader trend remains intact with key support near ¥153 and rising Japanese yields adding complexity.
The US dollar tried to rally against the Japanese yen to kick off the Thursday session, but we have since seen quite a bit of selling pressure. This does make a certain amount of sense, as traders are starting to worry about the FOMC interest rate decision next week on Wednesday, as traders are increasing their bets that the Federal Reserve is going to cut rates. It drives down the value of the US dollar at least temporarily. That being said, the interest rate differential continues to favor the US dollar over the Japanese yen. And this is something that will eventually have a longer-term effect.
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That being said, there is one thing that you need to pay attention to. And that's the Japanese bond market as yields are starting to rise in Japan, potentially negating this interest rate differential, at least to a point. With this, I think we've got some volatility ahead of us, but from a technical analysis standpoint, we haven't really broken anything yet. And I still look at the 153 yen level as a potential floor in this market. The 50-day EMA sits just above there as well. And I think that's worth paying attention to also. With this, a market could be looked at through the prism of offering an opportunity soon, but we need to see some type of bounce.
Right Side of the “V”
I want to start buying the US dollar on the right-hand side of the V pattern that may or may not show up. We'll just have to wait and see. But if we were to break down below the 152.50 yen level, then we have to ask questions as to whether or not the trend will have changed. Overall, though, I think this is a market that, given enough time, will find interest in buyers. I am bullish still, although this pullback of course, has given us a bit of a pause.
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