- The USD/JPY originally fell during Friday's trading session, but if there is still a lot of erratic behavior, it has turned around versus the Japanese yen. Under normal circumstances, this market will continue to fluctuate according to the vast difference in interest rates between the two currencies. In the end, I believe the upward trend will continue, and we will aim for the 150 level.
- At this point, I believe there are many buyers ready to jump in and buy US dollars whenever they are on sale, as evidenced during the Friday trading session.
- However, anything above that level then opens the prospect of a move to the 152 level.
A lot of people will be keeping a careful eye on the 147.80 level below because it is a strong resistance barrier. That region's "market memory" enters the picture and sustains the market. It would certainly alter significantly if you broke down below that, but as of right now, it appears that we are still favoring the US dollar relative to most other currencies. This is because interest rates in the US are still rising. The candlestick has a somewhat hammer-like shape, which is obviously a bullish candlestick that many people were paying special attention to. The 50-Day EMA is also entering the picture behind all of that and should also attract a lot of attention. In most circumstances, this significant amount of confluence should attract longer-term buyers and speculators alike.
Volatility Ahead
Expect high levels of volatility and erratic behavior, but considering how many issues have been raised recently, it's certainly true for nearly all financial markets at present. If everything stays the same, I believe we will return to the recent highs, but it will likely be more of a grind than anything else. Even though there are worries that the Bank of Japan would intervene, they have already demonstrated that they lack hawkishness during their most recent meeting, so I won't lie: I'm not very concerned about it.
Ultimately, I suspect this pair could go as high as 152 in the short term, but longer term we could be looking at much further than that. The Federal Reserve is clearly nowhere near loosening its monetary policy, and therefore the upward pressure should remain. Japan has struggled for some time with its debt, and this will keep the BoJ hamstrung.
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