- Given the ongoing interest rate gap in its favor, the US dollar continues to appear extremely strong when compared to the Japanese yen.
- Given this, it's essentially the same as what we've been seeing for a few weeks.
- Because of this, I think you need to be patient more than anything else.
Upon examining the dollar-yen pair and chart, it is evident that the US dollar's value relative to the Japanese yen remains unchanged. But in my opinion, that's really a positive thing. We are merely holding onto the most recent high, after all, and we want to break out higher. People will be focusing a lot of attention on the 152 yen level.
And we can really start to take off if we can break above there. However, I believe that a lot of buyers will stand by the 149.80 yen level if we decline from here. Following that is the 148.50 yen level, which is also beginning to get the 50-day EMA's attention. Consequently, assuming all else is equal, this market is still exactly what it has been for a while—a buy on the dips market.
The Bank of Japan is Stuck
The Japanese Central Bank, of course, is probably not going to hike rates at all this year, even if the Federal Reserve is expected to do so three times. They have far too much debt, and even if some speculate that they would hike interest rates by a tenth of a percent, there will still be a huge difference in interest rates between these two currencies that you could drive a truck through. You are therefore paid to hold onto them for as long as that is the case.
That's why it makes no sense to short this duo anytime soon. Though it may appear to be taking its time, consider this as a market that is building up inertia to eventually burst out to the upside. Nothing on the chart truly indicates that anything is changing. Many people stay onto this straightforward investment, which pays them a small amount each day through the swaps. That being said, we have to wonder if momentum will resume if we were to reverse below the 147.33 yen mark.
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