USD/JPY remains in a larger consolidation range, as we continue to see the interest rate differential play out in the “carry trade.”
USD/JPY
Daily Forex, this is Christopher Lewis taking a look at the US dollar against the Japanese yen. The US dollar has been very noisy against the Japanese yen during early trading on Wednesday as we continue to see a lot of sideways action, and I do think you have a situation where we have a larger consolidation area from which to trade. The 152-yen level on the bottom is the floor, with the 200-day EMA sitting just above it, and the 158-yen level above is the ceiling.
Ultimately, the 50-day EMA is sitting right in the middle, and I think that continues to be a major problem for traders because it unfortunately means that we are basically very tightly wound, and with this being the case, I'm not expecting major breakouts, at least not in the near term.
Testing the 1990 Peak High
That being said, longer term, I think we do break to the upside. And I believe that if we can break above the 158-yen level, that kicks off another attempt at the 160-yen level, which goes back to the 1990 peak high. If that were to break, I suspect that the yen would break and you could see a huge, longer-term move, possibly as high as 250.
Short term pullbacks continue to be buying opportunities as you get paid at the end of every day to own the dollar against the yen. And despite the fact that there is increasing odds out there that the US cuts rates down to 2% in 2027, there's a lot of news and economic information to come out between now and then, and that means that we could continue to see surprises. I remain bullish in this pair.