- During my daily analysis of the USD/JPY pair, I am noticing a few things here.
- Quite frankly, it looks like the 1.4850 level is trying to offer massive support, it is probably worth noting that the market has rallied quite significantly from that level before.
- However, I think you’ve got a situation where a lot of traders are focusing on the idea that the Bank of Japan might tighten monetary policy but are focusing so much on the fact that the United States is likely to keep its interest rates very high, at least for the time being.
- If that is going to be the case, based on predictions at the moment, we have the Japanese with a 0.75% interest rate by the end of the year, with the Americans at roughly 4.25%. In other words, you still will get paid to hold this currency pair.
Another thing to pay close attention to is that inflation really isn’t going anywhere in the United States. Ironically, Americans continue to buy things, and inflation is just a daily fact of life. If that continues, the Federal Reserve will have to stay very tight with its monetary policy, and eventually this becomes the main driver here.
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Technical Analysis
The technical analysis for this pair is fairly neutral at the moment, but I do have a potential buying opportunity if we can break above the candlestick from the Friday session. On the other hand, if we were to break down below the ¥148 level, then I think we fall apart and had to the ¥145 level.
It is not my job to tell the market what it’s going to do, it’s my job to determine that if something happens, I will make the appropriate reaction to it. This is the biggest mistake that many of you will make, you will look at the interest rate differential just assuming that the market has to go higher.
While I agree that given enough time that probably happens, markets can stay irrational for quite some time. All things being equal, I don’t want to try to guess what the market does, I would rather just wait for it to tell me where it’s going to go and follow quite closely.
Potential signal: I would be a buyer of this market if we can break above the Friday candlestick. Look at that as ¥150.90, and I would have a stop loss at the ¥148.80 level. For a target, I suspect that ¥152 would be the first target, followed by the ¥153 level.
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