I am still bullish in this pair, but the last few days have been a bit of a challenge for the US dollar.
USD/JPY
The US dollar has been all over the place against the Japanese yen as we continue to see a lot of headlines coming out about the war in the Middle East.
Ultimately this is an interest rate differential play, but I also recognize that this is a situation where we are pressing or at least had been until a couple of days ago, a major resistance barrier in the form of the 160.40 yen level or so, which was a swing high going all back to 1990. We have a lot of questions to ask here and if we do breakout to the upside, it will absolutely destroy the Japanese yen.
Interest Rates and Market Resistance
The 158-yen level underneath is a significant support level that I think is backed up by the 50-day EMA, so I’ll be watching that very closely. Interest rates in the United States, the 10-year yield, continue to hang around the 4.30% level. We saw it break through there earlier in the day but then jump back above there only to pull back to it.
Ultimately, I think this is a situation where a lot of people are trying to determine where interest rates go from here. If interest rates in America rise, that is going to be very difficult situation for the Japanese yen to deal with. I am still bullish because the interest rate differential does favor the dollar.
The question is whether or not we need to pull back even further to somehow find that value. I don't know that we do, but as long as we can stay above the 158 yen level, I’m looking for short-term bounces that I can buy into. I have no interest in shorting this pair because quite frankly I don't have any interest in trying to short this market.