- The USD/JPY has rallied a bit during the trading session on Monday, reaching the ¥145.75 level, an area that the Bank of Japan intervened at previously.
- The rate of change is relatively calm, and I think that is going to keep the Bank of Japan away from the market.
- Ultimately, this is a market that’s in an uptrend for a reason, therefore it’s difficult to short this market regardless.
The Federal Reserve continues to be very hawkish, and therefore the US dollar has been very strong against almost everything, including the Japanese yen. At the same time, the Bank of Japan has been buying unlimited bonds, so that is very dovish to say the least as it is tantamount to printing currency. In other words, the supply/demand part of the equation most certainly favors the US dollar, which is kind of ironic considering that the Federal Reserve has always been accused of printing too much.
US Dollar Likely to Continue Going Higher
If there are concerns about Federal Reserve tightening, that will continue to drive the US dollar higher. This is especially true against the Japanese yen as the Bank of Japan has reiterated more than once how they are dedicated to keeping interest rates lower. At the same time, the Federal Reserve is dedicated to keeping inflation down. In other words, this is essentially a “perfect trade”, and therefore I think we will continue to see a lot of money flow into this market to the upside.
Because of that, I think we’ve got a scenario where we are more likely than not going to see this pair simply grind away to the upside. Furthermore, every time he pulls back, I think we will more likely than not see buyers on dips trying to pick up bits and pieces of “value” along the way. The 50-Day EMA sits below and is acting a bit like an uptrend line, so pay close attention to that as well. The ¥140 level currently looks to be the bottom of the overall market, so we were to break down below that level then I think you must reevaluate the overall situation but as things stand right now, it’s very likely that we will end up trying to get to the ¥147.50 level before long.
Ready to trade our Forex analysis today? We’ve made a list of the best brokers to trade Forex worth using.