- The USD/JPY experienced a significant rally during Thursday's trading session, breaking well above the ¥140 level.
- This surge can be attributed in part to the Federal Reserve's more hawkish stance than anticipated on Wednesday.
- However, the European Central Bank (ECB) has also adopted a similarly hawkish stance, which has had a knock-on effect on the US dollar. Ultimately, this currency pair is largely influenced by the Japanese yen, suggesting that the midday pullback could present an attractive opportunity to go long.
A break above the top of Thursday's trading session candlestick would be an extremely bullish signal, potentially propelling the US dollar much higher against the Japanese yen. In the long term, I believe this is an inevitable outcome, especially considering the recent breakout from a major bullish flag, a clear bullish indicator.
Should we break above this level, the "measure move" suggests a target of ¥148. On the flip side, the ¥138 level represents substantial support, as it was the peak of the previous ascending triangle. Additionally, the 50-Day Exponential Moving Average is rapidly approaching this area, providing another layer of support. Ultimately, I anticipate a return of buyers, assuming the market even dips to these levels. The current market conditions present a promising buying opportunity for the US dollar against the Japanese yen, although Friday's Bank of Japan meeting could introduce some market noise.
A correction Seems Unlikely
The Japanese authorities have indicated their intention to maintain a loose monetary policy, so a major correction in the long term seems unlikely. At this point, the market appears to be offering "cheap US dollars", an opportunity I am more than willing to capitalize on. I have no intention of buying the Japanese yen in the near future unless of course there is some kind of major shift in the overall attitude of the Japanese.
In the end, the US dollar's significant rally during Thursday's trading session, breaking well above the ¥140 level, presents an interesting dynamic. Influenced by the Federal Reserve's hawkish stance and the Japanese yen, the current market conditions present a promising buying opportunity for the US dollar against the Japanese yen. Despite potential market noise from the upcoming Bank of Japan meeting, the long-term outlook suggests a bullish trajectory for the US dollar, making it an attractive investment opportunity.
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