- The USD/JPY is around the sea. After all, we are trying to recapture the ¥133.50 level. This area could cause a little bit of a headache, but ultimately you also must keep in mind that there are many moving pieces now.
- After all, the market must deal with the fact that the Bank of Japan may be losing the argument when it comes to keeping the interest rates down.
- This is a market that given enough time could threaten the 200-Day EMA and that course is an area that many people will be paying close attention to.
The market has seen a massive turnaround by the Bank of Japan, as it suggested that the 10-year note was able to flow to the 50-basis point level. We have seen the bond markets already reached the 48-basis points level, so I do think that it is probably somewhat limited in how much further the bank has leeway due to the fact that they will have to start printing yen in order to buy enough bonds to keep that interest rate lower. Because of this, one must wonder how much more the Japanese yen can strengthen.
Be Small with Your Position Sizing
If we take out the massive red candlestick from last week, that’ll be an extraordinarily bullish sign, and would probably see this pair rally right along with many others involving the US dollar. The 50-Day EMA sits at the ¥138.27 level and is dropping, so that could be a short-term “ceiling in the market.” On the other hand, if we do turn around and break below the bottom of the candlestick from last week that is so prominent, that could open an attack on the ¥130 level.
Breaking down below there would be very negative and could send this market much lower. In that scenario, we would probably see the entire trend unraveled from a longer-term standpoint. As things stand right now, it is still a nice pullback, and it is a short-term rally in the end, but whether they can continue to fight the bond market is a completely different question, so it’ll be interesting to see how this plays out. With this, be small with your position sizing, as liquidity will also be an issue.
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