During Thursday's trading session, the US dollar initially retreated but eventually demonstrated strength against the Japanese yen. The market's focus centers on the critical 50-Day Exponential Moving Average, a widely followed technical indicator that has garnered significant attention from traders.
The US dollar's recent performance against the Japanese yen suggests an ongoing struggle near the 50-Day EMA. This technical indicator holds immense significance and attracts substantial attention from market participants. As things stand, the market continues to witness a steady influx of buyers, indicating sustained interest in the US dollar. If the USD/JPY pair manages to break above the ¥140.50 level, it could pave the way for further gains towards the ¥142.50 level, which has held historical importance.
The Bank of Japan's loose monetary policy continues to exert downward pressure on the Japanese yen, which works in favor of the US dollar. Conversely, the Federal Reserve maintains a comparatively tight monetary policy stance. Although some speculators anticipate a shift in the Federal Reserve's policy, the reality is that any such change is far from imminent. Consequently, it is reasonable to expect traders to maintain positions in this pair, as it offers positive swap opportunities at the end of each day.
I Am Bullish Over the Longer-term
- In terms of support, the ¥138 level remains significant, having served as the previous top of an ascending triangle pattern. Bouncing off this level indicates a potential bottom in the market.
- Considering the ascending triangle formation, the "measure move" suggests a long-term target of ¥148.
- However, the timeline for reaching this level remains uncertain. While an upward trajectory is anticipated, it is important to acknowledge that it may not be a smooth path, as volatility is expected to persist in the market.
The US dollar displays resilience against the Japanese yen, with the market's attention focused on the critical 50-Day EMA. Ongoing loose monetary policy from the Bank of Japan and a comparatively tight stance from the Federal Reserve favor the US dollar. Traders are advised to remain cautious and prepare for potential volatility in the USD/JPY pair. This is nothing new, but at this point, I am bullish over the longer term and think that the market will continue to look higher, as the pair pays at the end of the trading day. With this, there is no point in trying to short this market.
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