- The US dollar has been choppy against the Japanese yen during trading on Tuesday, as we are simply flailing about trying to find some type of momentum.
USD/JPY
The US dollar has been choppy against the Japanese yen during trading on Tuesday, as we are simply flailing about trying to find some type of momentum. I don't think we're going to, at least not in the short term, as we are going to be more worried about the holiday and the lack of liquidity than anything else.
All things being equal, this is a market that I think is going to continue to pay close attention to the 50-day EMA underneath, which is sitting just below the 155 yen level. I suspect that area in that general vicinity is your short-term floor, while the 158 yen level above is your ceiling.
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I don't expect to see any major change in the short term, but I do recognize that eventually we will have to break out of this range. If we can get above the 158 yen level, then I do think that the dollar will go to the 160 yen level. A breakdown below the 154.50 yen level opens up a move down to the 153 yen level.
Interest Rate Differential
Fundamentally speaking, the Bank of Japan did just raise rates, and the Federal Reserve is expected to cut once or twice in 2026, but the reality is that the interest rate differential is still wide enough that you can drive a truck through it, and the Bank of Japan really has no ability to tighten monetary policy significantly.
We are starting to hear murmurs of Japan tightening, and while that might be true to a point, the demographics of the country and quite frankly, the debt load don't allow that to be a major feature going forward. I like the idea of buying dips against the yen and will continue to do so.
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