- The USD/JPY initiated Tuesday's trading session in the Asian market on a positive note against the Japanese yen. However, it soon underwent a downturn, testing a crucial trendline.
- Subsequently, it experienced a rebound, indicating our pursuit of solid support to reestablish the prevailing trend's momentum. At this juncture, it becomes imperative to remember the ideas on which this trend rests, cautioning against building massive positions.
- Nonetheless, it remains important to remain vigilant regarding the overarching long-term trend.
- Given the circumstances, a plausible scenario may include a resurgence towards the ¥149.80 level. Should we successfully rally beyond this level, the market could witness a fresh group of buyers reentering to chase performance.
Conversely, should the market break down below the ¥146.80 level, it might kick off a resurgence of the Japanese yen against the US dollar, guiding this currency pair toward the 200-Day EMA. While this may appear ambitious, especially considering the favorable interest-rate differential that tilts in favor of the US dollar, a substantial group of traders relentlessly clamors for lower interest rates in the United States, looking for “Uncle Jerome” to save everyone. They remain vigilant in this nonsense, perhaps attributed to the Federal Reserve's long-standing conditioning, which has deeply ingrained this expectation since the Great Financial Crisis. As a result, we now find ourselves entrenched in an intense and high-stakes game of "chicken."
The Pair is Building Inertia
All things considered it is reasonable to anticipate an impending explosive market move. However, it is prudent to acknowledge the possibility of a period of gradual progress on the way up – or down, necessitating a cautious approach to trading. In this context, it seems judicious to contemplate purchasing during market dips, adopting a measured and incremental approach to building positions. Should we successfully breach the previously mentioned ¥149.80 threshold, it could potentially kick off a substantial upward surge, with the ¥151.50 level emerging as an enticing and attainable target. While some degree of anticipatory turbulence is expected, it is imperative to underscore that we remain firmly ensconced in an upward trajectory, fostering an environment conducive to sustained growth and potential opportunities for astute traders as the interest rates continue to favor the USA, and the BoJ has more than once fumbled the ball.
That being said, the market is doing the best it can to convince itself that the Japanese are going to tighten. They won’t, but the game we are playing at the moment is to pretend that they are going to.
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