The US dollar initially fell against the Japanese yen on Monday as traders ran to safety during Asian trading. However, cooler heads have prevailed.
The US dollar initially fell against the Japanese yen on Monday as everybody lost their minds about the latest comments coming out of Donald Trump and the European Union, suggesting that the trade deal between the US and the EU was over.
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This had people running to safety. The US dollar sold off against multiple currencies around the world, and it does make a certain amount of sense that people ran to the Yen, but the reality is this is an ongoing game that we’ve been playing for months, and I think traders have realized that this is just more of the same. Nothing has actually changed. So what if there’s no trade agreement between the United States and the European Union? That was how we functioned for several months, and the world didn’t fall apart.
The Bank of Japan does have a meeting this week, and that’s something to pay attention to, but at the end of the day, the Japanese can only raise rates so high. Their bond market is already doing it for them, and it’s causing some pain. The Yen could very well find its way to the 160 level against the US dollar, maybe even higher than that. In fact, some pundits that I know are calling for something like 250 before this is all said and done.
Buyers Are Returning
Now that doesn’t mean it happens overnight, obviously it wouldn’t, but this little consolidation area that we had been in, we had broken out of, we pulled back to 158, and it looks like the buyers are returning.
Because of this, I like the idea of buying this pair. I think the 50-day EMA also confirms that there is support underneath. As far as this pair is concerned, you get paid at the end of every day, so you get to collect that interest rate differential and continue to ride the wave higher.
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