The US dollar rallied against the Japanese yen again on Wednesday, as we wait to see If the massive potential breakout above plays out. At one point, if this happens, it will be the biggest story in markets.
USD/JPY
The US dollar has rallied against the Japanese yen during trading on Wednesday as it looks like we're going to do everything we can to try to break that massive resistance barrier that goes all the way back to 1990. This would basically be the 160.40-yen level and clearing that could really get this thing racing to the upside.
In that environment, it more likely than not will become a buy-and-hold type of situation and I do believe that means the market will probably have quite a bit of momentum shown. In this type of environment, you do have to be cognizant of the potential for trouble as the Bank of Japan could very well get involved. Intervention would not be a huge surprise to be honest, but we will have to wait and see. If the market makes up its mind – that will be futile to say the least.
Gearing Up for a Significant Breakout
Ultimately, I do believe that this is a market that will eventually break above due to interest rate differentials, especially as the Bank of Japan can only do so much to tighten monetary policy while the Federal Reserve looks like it's going to stay put for a while.
With this, I believe market participants are gearing up for a huge move. This could be a multi-year move for that matter. Pullbacks at this point in time continue to invite buying, as well as the 50-day EMA underneath current pricing and the 158-yen level offering support. I have no interest whatsoever in selling this pair, as I am not going to pay for the swap.