The US dollar plunged against the Japanese yen during the trading session on Monday, and it looks like we will be trying to find value on a dip yet again.
USD/JPY
The US dollar plunged against the Japanese yen during the trading session on Monday as the 158 yen level continues to be a bit of a barrier. If we can break above the 158 yen level, then it is possible that the market could continue much higher. But I think ultimately at this point in time, we have a lot of questions asked about whether or not the Japanese yen can continue to sell off.
Quite frankly, with the election results over the weekend, I suspect that we will remain in a dovish type of situation when it comes to the Japanese yen. This pullback is probably simple profit taking and perhaps a little bit of a response to US dollar weakness on the whole. We are hanging around the 50-day EMA, which of course is a significant technical indicator that a lot of people will watch.
Support and Resistance Levels
Even if we do break down below here, it is likely that the market could go looking to the 154 yen level, maybe even the 200-day EMA. All things being equal, this is a situation where the 152 yen level is your absolute floor.
If we turn around and go to the upside, we could break above the 158 yen level, maybe go looking to the 160 yen level. I do believe that the carry trade will continue to be a major player in the forex world. While the US dollar should eventually bounce here and offer a buying opportunity, I think you also have to look at other Japanese yen denominated currency pairs such as the British pound against the Japanese yen and the Aussie dollar against the Japanese yen. I am still very bearish on the yen.