The USD/JPY has pulled back just a bit during the trading session on Thursday as we continue to wait for Jerome Powell to bloviate at Jackson Hole, Wyoming on Friday morning. He will give a statement/speech that will hopefully give people a bit more clarity as to what the Federal Reserve is going to do. If history is any indication, he will say one thing, while the market will interpret the exact opposite. This man is horrible at his job.
We are sitting at an extreme high and aren’t too awfully far from breaking out to a fresh, new high. The ¥140 level would be an area of the target, as well as an area of resistance. The range over the last several days has been rather tight, so therefore it’s obvious that we are waiting on something. If we do pull back from here, it’s likely that the market could go down to the 50-Day EMA, looking for some type of support. On the other hand, if the market rallies from here, then it’s likely that we will challenge that previously mentioned ¥140 level.
The Dollar is Expected to Strengthen
All things being equal, this is a market that I think remains bullish due to the idea of the Bank of Japan continuing to do whatever it takes to keep interest rates down. The 10-year note in Japan is being artificially suppressed at the 0.25% level. The Bank of Japan has pledged to buy “unlimited bonds”, so therefore it’s likely that we will continue to see the Japanese yen suppressed. On the other side of the trade, we have the Federal Reserve looking to tighten monetary policy, so therefore it should continue to push this market to the upside.
A lot of back and forth will be the norm, but we are still very much in an uptrend. In fact, if we stay above the ¥132 level, I don’t see anything to be concerned about. If we were to break down below that level, then it’s likely that we could drop down to the ¥128 level. The ¥128 level is the area where the 200-Day EMA is rapidly approaching, so it should offer a significant support level on any pullback. It’s not until we break the role that that I would be parish of this pair.
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