- During Monday's trading session, the USD/JPY displayed a noteworthy rally, surpassing the ¥145 level once again. As we find ourselves ensconced in an ongoing uptrend, the prospect of its continuation over the extended term gains prominence.
- A critical factor to bear in mind is the enduringly accommodative interest rate policy upheld by the Bank of Japan. This policy's persistently loose stance is poised to exert sustained downward pressure on the currency's valuation. In this context, while the trajectory leans towards upward movement, the market might be slightly overextended, implying the likelihood of intermittent short-term pullbacks.
- A breakdown below the confines of recent consolidation patterns could signal the need for a more profound correction. In the event of such a correction materializing, a descent to the ¥142.50 level becomes feasible, while retaining an overall bullish outlook.
Notably, the ¥142.50 level coincides with the presence of the 50-Day Exponential Moving Average (EMA). Consequently, this level is likely to function as a robust "market floor," a point of interest for market participants seeking entry. Should a breakdown below this level occur, the trajectory could lead towards the 200-Day EMA or potentially even more substantial declines. However, in the absence of explicit indications of monetary policy shifts by the Federal Reserve or any unexpected tightening by the Bank of Japan, the probability of such events remains remote.
Buying on Dips is a Good Strategy
At this juncture, neither of these scenarios appears imminent. Therefore, the market finds itself in a position where the trajectory is likely to ascend over the long term. I find merit in the notion of capitalizing on market dips, as it presents an opportunity for well-timed buying. In essence, this market is navigating a landscape where the long-term direction remains a point of gradual clarification. The ¥150 level emerges as a prospective target to consider, underscored by the persistent noise that characterizes this market. In broad terms, the market's upward momentum endures over the extended horizon, and this momentum is poised to persist for the foreseeable future.
To summarize, Monday's trading session witnessed a commendable rally by the US dollar, reclaiming the ¥145 level. This reinstates the ongoing uptrend, likely to continue over the extended period. The backdrop of the Bank of Japan's accommodative interest rate policy casts a consistent shadow, exerting downward pressure on the currency's value. While the market's trajectory signals upward momentum, the potential for short-term pullbacks remains. A decline beneath recent consolidation parameters might indicate the need for a deeper correction, potentially down to the ¥142.50 level. This juncture also coincides with the presence of the 50-Day EMA, enhancing its significance. As the market traverses through this dynamic phase, buying on dips emerges as a prudent strategy. All in all, the path ahead is characterized by noise, but the trajectory leans towards sustained upward momentum, holding true for the foreseeable future.
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