- The US dollar initially fell against the Japanese yen during early trading on Monday, only to turn around and show signs of life again.
- All things being equal, this is a market that I think continues to see a lot of value hunting, and I recognize that the 158 yen level is an area of significant resistance and an area that's been important multiple times.
The fact that we look like we are trying to reclaim that and go higher is a very bullish sign, and in that environment, we could go looking to the 160 yen level. The 160 yen level is an area that we have seen the Bank of Japan intervene at previously.
Taking Advantage of Carry Trade
But with this, I also keep in mind that the market is going to continue to see a lot of traders trying to take advantage of the carry trade, and although the US dollar is a little bit soft against multiple other currencies, the reality is that the Japanese yen is extraordinarily weak. It should be because the Bank of Japan has no real chance of raising rates significantly, as the debt level is far too high for the interest rates to be very elevated.
Top Regulated Brokers
This being the case, I think you continue to see a lot of buy on the dip behavior with the 156 yen level offering support as the 50-day EMA is racing towards there. If we can break above the 160 yen level, we could really take off, and we could be talking about a multi-year rally.
I don't know that's going to happen yet, but I certainly know that I have no interest in shorting this pair. Therefore, I look at it as the same as I have for the last year or so, I just look at anytime the US dollar falls against the Japanese yen, you have to believe it's an opportunity to get involved.
Want to trade our USD/JPY forex analysis and predictions? Here's a list of forex brokers in Japan to check out.