The USD/JPY has pulled back just a bit during quiet trading on Tuesday, as we had tried to break above the recent high. We obviously could not continue to go higher, so it’s worth noting that the market is more likely than not going to continue to drive more than anything else.
At this point, the 50-Day EMA sits above the ¥140 level and is rising. I do think that this is a situation where eventually we will see buyers coming to pick this market. At, I don’t think we get all the way down there because I think there are plenty of support levels near the ¥145 level, the ¥142.50 level, and then eventually the ¥140 level. If we were to break below the ¥140 level, then we could see further selling pressure.
Be Patient
- On the other hand, if we turn around and take off to the outside, it’s likely that we will see this market to the ¥147.50 level, and then of course the large, round, psychologically significant figure out the ¥150 level. Regardless, we are in an uptrend and will continue to be so if the Bank of Japan continues to buy unlimited bonds.
- Furthermore, we also have the Federal Reserve tightening monetary policy, it’s difficult to imagine a scenario where this thing turns around anytime soon.
- I think now, it continues to be a “buy on the dips” scenario. Ultimately, this is a situation where a little bit of caution and patience will go a long way, and therefore I think we’ve got a situation where I would not sell this pair until something fundamentally changes, which of course is not going to happen anytime soon.
This is a situation where it’s a one-way trade, but the momentum is going to be much lower than previously, as the Bank of Japan has at least made its presence known. They won’t necessarily be able to change the trend, but they are willing to slow things down. With this being the case, it’s very likely that we continue to see plenty of reasons for the market to go higher. The attitude remains the same, but you may have to be quite a bit more patient than you were just a few weeks ago.
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