The US Dollar is continuing its assault on the Japanese yen, as we are approaching a massive resistance barrier that has stood since 1990.
USD/JPY
The US Dollar continues to see a lot of upward pressure against the Japanese Yen as we are threatening the crucial 160 Yen level.
This is an area that I have been talking about for a while because between there and about 160.40, we have a massive amount of resistance that goes all the way back to 1990. So, if we can break out above this, I think we really could start to take off.
Interest Rate Differentials and Potential Intervention
Keep in mind the interest rate differential favors the US Dollar and at this point in time, interest rates in America continue to climb. The Bank of Japan could very well intervene, but ultimately, I think that will be in a verbal and perhaps a one-off type of situation where traders continue to chase yield.
With the war premium being put into the US Dollar via the interest rate markets and the fact that Asia is going to be struggling to get fuel, I don't know how much the Bank of Japan can do. I don't think it would be a permanent solution.
We are on the precipice of something rather unique and important happening, so I would tell you to make sure you pay attention to this. Most currencies will probably gain against the Yen in this environment as the Bank of Japan might raise rates, but the interest rate differential is still going to be wide enough to drive a truck through.
As long as that is the case, I buy dips. I think there is a significant floor at the moment right around 158 Yen unless of course there is actual intervention, then probably somewhere near 156 I think we reset to start buying again.