The US dollar has rallied against the Japanese yen yet again, as the markets are testing a multi-decade ceiling.
USD/JPY
The US dollar has rallied initially against the Japanese yen during the trading session on Tuesday as the 158-yen level has been tested again. This is an area that I think is rather important and I think could possibly extend to 160 level.
The reason I’m watching this and I have mentioned this a couple of times is that the 160 level is an area where if you look back on longer-term charts you could see a breakout above the massive resistance barrier there that goes all the way back to 1990. If that were to happen the US dollar will absolutely pummel the yen probably for years.
Potential Long-Term Resistance Breakout
The interest rate differential will continue to favor the US dollar and that's why I'm watching this pair so closely because of the potential long-term move. If you zoom out on a longer-term chart such as the weekly chart or even the monthly chart what, you’ll find that there are quite a few interesting parties right here at about 160 and we are doing everything we can to break above there.
If we rally from there, you're looking at 242 which is the next major supply area followed by 250 yen. It seems like a wild thing to think but when you think about how long we have formed this bottoming pattern and the demographic issues that you have in Japan it's not far-fetched. This could be a major turning point in Japanese economic outlook.
This market continues to be one that I think you need to watch very closely because one day the yen could very well get evaporated and you'll see it fall against everything and then we'll be talking about carry trade in the sense of holding for months if not years. In the meantime, short-term pullbacks I think see plenty of buyers at 156 yen and again at the 50-day EMA just below there.