- The USD/JPY has initially fallen a bit during the trading session on Monday but then turned around to show signs of life again.
- By doing so, it looks as if the market is trying to find its footing, right around the ¥135 level.
- It’s also worth noting that the 200-Day EMA is right in that area as well, so it all comes together to show signs of a potential short-term bottom.
- Whether or not it is long-term remains to be seen, but at this point, we have been going back and forth for a while.
If we can stay above the ¥134 level, the market remains in somewhat of a bullish trend. Keep in mind that the 200-Day EMA is not like a brick wall, it’s an area where we would see a lot of buying pressure. At this point, the market more likely than not will continue to be very noisy, as we do not know what will happen over the next couple of weeks, but the one thing that we can be aware of is the fact that the liquidity will more likely than not start to dry up at the end of the calendar year. After all, the money managers out there will not want to take massive risks heading into a very illiquid time.
Noise Ahead
If we do break down below the ¥134 level, then it’s possible that we could go down to the ¥130 level. Anything below there could open the possibility of even further selling pressure. On the other hand, if we turn around and take out the 50-Day EMA, it opens the possibility of a move much higher, and the recovery of the overall uptrend. If that does happen, then I think we go back toward the ¥150 level, especially if interest rates start to rise again. Jerome Powell does everything he can to reiterate to the markets that he’s going to stay “tighter for longer”, but the markets continue to argue about the situation.
Nonetheless, this is a market that’s going to end up being very noisy in general, so therefore I think you get a situation where the market is one that you must be cautious with, especially considering that liquidity will only continue to drain between now and the end of the year.
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