- The USD/JPY witnessed another bout of depreciation against the US dollar on Monday, as the ongoing upward momentum persists.
- In this market environment, it is evident that buyers remain inclined to seize opportunities on each price dip.
- This dynamic is attributed to the enduring interest rate differential that encourages market participants to engage in swap transactions, allowing them to accrue payouts at the end of each trading day.
It's essential to underscore that Japan currently lacks the capacity to implement any substantial tightening of its monetary policy in the foreseeable future. This prevailing circumstance sets the stage for the prevailing narrative.
From a technical standpoint, the ¥150 level emerges as a key zone of significance. This level is marked not only by its numerical magnitude but also by its historical relevance as an area of considerable market activity. Furthermore, the 50-Day Exponential Moving Average (EMA) situated just below offers an additional layer of robust support. Consequently, the market is poised for an influx of buyers seeking value, reaffirming the "buy on the dips" strategy as the preferred approach. Indeed, the need for concern regarding the prevailing trend only arises in the event of a breakdown beneath the ¥147.80 level. In such a scenario, a thorough assessment of underlying fundamentals would be a prerequisite before considering bearish positions.
A Bullish Outlook Prevails
On the upside, a breach of the ¥152 level would open the gateway to a more protracted upward trajectory targeting the ¥155 level over the longer term. Subsequently, the pair's overall trajectory suggests a gradual ascent. The sole factor capable of disrupting this course would entail alterations in the divergent monetary policies of central banks. Given the Bank of Japan's daunting debt concerns that hinder its ability to raise interest rates significantly, the predominant influence on this currency pair will likely hinge on the Federal Reserve's stance towards monetary tightening. Presently, the Fed appears to exhibit a degree of hesitance in curtailing its monetary tightening efforts. Consequently, a bullish outlook prevails, with no compelling rationale for anticipating a significant downturn in this pair anytime soon.
Potential signal: If the USD/JPY CLOSES above 152 for the session, I am buying here. I will have a stop at 150.50 underneath and am aiming for the 155 level.
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