The US dollar rallied somewhat on Wednesday against the Japanese yen, with the 160 level above offering some kind of massive ceiling.
USD/JPY
The US dollar rallied a bit against the Japanese Yen during the trading session on Wednesday as we continue to see a lot of back-and-forth trading in the same range that we have been in. Ultimately, I think the US dollar will continue to be favored over the Japanese Yen as the interest rate differential still favors the Greenback.
The market is likely to continue to be watching the 160 Yen level as it is so important. Because of this, I believe you have a scenario where every time we drop, there will be traders out there willing to take advantage of cheap dollars and of course the interest rates in the United States continue to rise overall. So, with that, it’s more likely than not it only becomes a bit more exacerbated.
A Divergence in Central Bank Policy
Really at this point in time, we have a situation where the two central banks are in different worlds right now with the Federal Reserve likely to have to stay somewhat tight with monetary policy while the Bank of Japan has no real recourse to raise rates and ultimately I do think that we are watching the 160.40 Yen level as a massive barrier.
If we could break above there, it would break the high from back in 1990 and I think that is doom for the Japanese Yen. We are just sitting here grinding away with the central bank out there looking to try to keep the Yen somewhat viable, but if this thing kicks off, it could be massive in its implications and it could send the US dollar higher for years.
We’ll just have to wait and see how this plays out, but as things stand right now, I like the idea of buying dips with an eye on 158 Yen for support and then again, the 50-day EMA.