The US dollar fell hard early on Monday, as the interest rates in America continue to drive where we are going next.
USD/JPY
The US dollar fell hard during the trading session on Monday as traders continue to bounce back and forth between a couple of areas yet again. All things being equal, the 160-yen level continues to be a major barrier with the 158-yen level underneath being a major support level.
All things being equal, this is a market that market participants continue to look at the risk premium as a reason to get involved, but we should also keep in mind that interest rates in the United States continue to climb and if they do continue to do so, that will put more pressure on the upside to this market.
Potential Upside and Support Levels
If we can break above the 160-yen level significantly, maybe even the 160.40 yen level, then I think you have a situation where markets continue to go much higher, perhaps to the 250 yen level. On a breakdown from here, we could see support at the 50-day EMA, possibly even the 156 yen level and I think that the downside is probably somewhat limited, although we have the scenario where a lot of traders will be looking to buy the dip as the Bank of Japan can't do anything as far as tightening monetary policy while rates in America remain stubborn.
With this being said, the market is likely to show that we are looking at this through the prism of perhaps trying to find value and of course as long as there are concerns around the world with war, it does put a bid in the US dollar.
While most people look at the Japanese yen as a safety currency, the problem Japan has is not only the interest rate differential but the fact that they are having trouble getting oil with the present situation. That's a bit of a 1-2 punch that I think continues to put a bid in this market.