The USD/JPY pair continues to see inflows at the moment. Ultimately, this is a market that is still “one way.”
USD/JPY
Dantley Forex, this is Christopher Lewis looking at the US dollar against the Japanese yen. Initially, the market just took straight off to the upside against the Japanese yen in Asia as the US dollar has gotten a bit of a safety bid due to the war. This was interesting because a lot of times the Japanese yen gets that bid, but we've seen the US dollar swallow almost everything at one point or another during trading.
Now, I think this sets up a pretty obvious buy on the dip type of market that we've seen multiple times. In fact, if we pull back towards the 50-day EMA, 200 pips lower than we are, I'd be very interested in buying this on the first signs of a bounce. However, if we can clear the 158-yen level, there's an argument to be made that we will eventually break the 160-yen level. And that is a huge deal.
Why ¥160 Is a Historic Level
Because that goes back to 1990 as far as resistance is concerned. The measured move would be for a move to roughly 250. That's how important that is. The interest rate differential would continue to pay you for the next 10, 12 years if it takes as long to get there as it took to break down from there. Obviously, this is a longer-term investment type of situation, but it is worth watching.
In the short term, I think you will continue to see a lot of noise back and forth, but with the Bank of Japan having to deal with so much debt in the Japanese economy, I don't see how you short this pair. I wouldn't do it, and I certainly don't want to pay swap to do it. I’m either on the sidelines or I am long of dollars against yen. That hasn't changed.
Potential signal: I am a buyer on a dip close to the 155.50 level. I would have a stop loss of 100 pips. I would also be a buyer (although not as aggressively) on a move above the 158 level, with the same stop loss.