The US dollar continues to bounce against the yen, waiting to see if we can break higher.
The US dollar has rallied a bit against the Japanese yen during trading on Thursday as we continue to see a lot of noise in the interest rate environment.
The 158-yen level on the bottom of the range and the 160-yen level on the top is how I see the market right now.
Obviously, there is a lot going on that could greatly influence what happens next, not the least of which of course would be any ceasefire talks in the Middle East, but I would also watch very closely the 10-year yield in both countries, but specifically the United States.
The longer it stays above 4.3% the more likely it is the US dollar breaks out. It has fallen back below there during this session so we will see how that plays out. I suspect probably what you are going to see more than anything else is a lot of volatility over the next couple of days because we have those ceasefire talks on Friday in Islamabad, so we will have to see how that plays out.
Market Volatility and Key Resistance
It certainly looks like the USD/JPY market is pricing in some type of good news when I look at other assets. So, I anticipate that the US dollar may weaken a bit but ultimately this is a market that I also pay close attention to the 160.4-yen level because that would be an area that if we could break above it could really spell serious trouble for the Japanese yen.
That is a 1990 high that the US dollar made against the Japanese yen and if we were to break that, things could get ugly really fast. All things being equal, I do think this is a scenario where traders are going to have to be very patient, but I do think it also remains a buy-on-the-dip type of scenario as clearly the interest rate differential will continue to favor the US dollar.
Top Regulated Brokers
Again, I think the 158-yen level continues to be a major support for the greenback right now and I do like the idea of buying closer to that, in fact I did overnight. But you can see just how noisy this market might end up being and with that being the case you do have to be somewhat cautious with your position sizing, but ultimately, I believe this is a market that will threaten that 160.4-yen level which is so important.
If we were to break down below the 50-day EMA then that obviously would be a major breakout just waiting to happen and, in that way, the Japanese yen probably strengthens across the board for not only moving against US dollar but maybe other currencies. The 156-yen level at that point for me would be the next support level.
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