- Early on Thursday, the US dollar dropped significantly versus the Japanese yen, possibly as a result of traders taking note of Friday's nonfarm payroll announcement day.
- This announcement has a huge impact on this particular currency pair.
- This has always been the case, and I just don’t see that happening.
The dollar has fallen fairly sharply against the Japanese yen early in Thursday's trading session. It appears that we may attempt to approach the 147.33 level, which is still, in my opinion, a fairly supportive area. As such, I would be interested in purchasing on a bounce. However, I also understand that the real story here will be revealed by the jobs number on Friday, so bear that in mind as well. Before that significant economic announcement, this pair's behavior is actually fairly typical. This market is going to be cautious at first, but the longer-term trend should continue to be what people pay the most attention to.
Interest Rate Differential Continues to Matter
Given that, I believe that market players will continue to be highly aware of the interest rate differential. As a result, we should be aware that, while a governor of the Bank of Japan has suggested raising rates by 10 basis points, doing so would still only result in the Japanese interest rate falling to zero. Jerome Powell's testimony before Congress on Wednesday may have contributed to what is happening in this situation because he hinted that rates will likely be lowered at some point this year.
Long-term holding of Japanese yen relative to the US dollar is costly, and the interest rate differential will remain exceptionally large. Thus, I do believe that there is a slight bounce. This will be particularly true if the jobs report is slightly higher than expected. Therefore, I do believe that Friday has the ability to save this couple. Even though Thursday has been quite difficult thus far, I still prefer buying the dip and have no interest in shorting it. In any case, I'm searching for a chance to go long, and those wishing to purchase "cheap US dollars" may benefit greatly from a small selloff. Right now, I'm not interested in purchasing the yen in any scenario.
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