The dollar continues to rise against the yen overall, threatening the breaking of a massive barrier.
USD/JPY
The US dollar initially pulled back during the trading session on Wednesday only to turn around and show signs of life again. By doing so it is very much like a market that we are looking at at the 160-yen level. The 160 yen level is a large round psychologically significant figure and an area that the Bank of Japan has defended a couple of times in the past so it will be very interesting to see how this plays out because we do have the Federal Reserve later today and then we have the Bank of Japan coming out overnight.
All things being equal, this is a situation where if the Fed is a little bit more hawkish than expected while the Bank of Japan remains dovish, remaining stuck in their position, then we could very well see this market take off to the upside.
Long-Term Trends and Support
If we break above 161 yen, then at that point in time we have just smashed through a barrier that goes all the way back to 1990. This is a chart I watch and report almost daily because once this happens you could be talking about a multi-year trend it really could be bad news for the yen.
If we do pull back, I think 158 yen will continue to be very supported. I have no interest in shorting this pair. I am not paying for the swap at the end of every day anyway if I want to sell the US dollar, I will sell it against something that actually pays me a positive swap or at least doesn't have the interest rate differential that these 2 currencies have. With the Bank of Japan being stuck, I think it is only a matter of time. We will see what Powell does at the press conference later in the session because that could be a huge determinant.