The market will continue to be very noisy as we have got a little ahead of ourselves, and of course, there are a lot of questions as to whether or not the interest rates will continue to climb.
- The USD/JPY has fallen a bit, pulling back from the ¥145 level.
- This is an area that has offered quite a bit of resistance in the recent past, and of course, it is a large, round, psychologically significant figure that a lot of people will pay attention to.
- Ultimately, I think this comes down to whether or not we can continue to build up enough momentum to finally break above there. If we do, then the market has a real shot at going to the ¥147.50 level.
The ¥140 level underneath should be supported, and if we were to break down below there is likely that we could see the market and look to the 50-Day EMA. That is an indicator that a lot of people will pay close attention to, and therefore is likely that we have a scenario where we continue to see “buy on the dip” type of actions. The market will continue to be very noisy as we have got a little ahead of ourselves, and of course, there are a lot of questions as to whether or not the interest rates will continue to climb.
Market Likely to See a Lot of Noise
On the other side, you have the Bank of Japan which of course is doing everything it can to keep interest rates down, so which means that they are engaging in “quantitative easing.” The market is likely to continue to see a lot of noisy behavior, as we have to work out and work off a lot of the excess momentum.
I do believe that there will be plenty of noise along the way, but I think that this is all going to come down to the interest rate differential between the 2 central banks. The Federal Reserve continues to be extraordinarily aggressive, which makes this a bit of a “one-way trade”, although it doesn’t the silly me that every day is going to be a green candle. Looking at this chart, you just need to be a bit patient in order to make the trade and wait for the market to turn around and bounce on a short-term chart so that you can get involved yet again. Longer term, I do think that we break above the ¥145 level but it’s a process, not an immediate thing.