The interest rate differential is the main story in the USD/JPY pair, as I remain bullish overall.
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USD/JPY
From Daily Forex, this is Christopher Lewis taking a look at the US dollar against the Japanese yen. The US dollar has rallied a bit during the trading session on Monday, rallying a bit after testing the 156-yen level a couple of days previous. At this point, if the market were to rally from here, I think the 158-yen level which is an area that I think will matter pretty significantly.
All things being equal, this is a market that the 50-day EMA will be keeping a bit of a lid on at the 158-yen level as well. So, if we were to break above there, then the US dollar could go looking to the 160-yen level.
Long-term Resistance and Central Bank Intervention
There is a little bit of an area just above there that I think continues to be very difficult to break above and if we were to break above the 160.50-yen level, that will have a significant move just waiting to happen as breaking above there is a swing high being shattered from 1990.
The interest rate differential continues to favor the US dollar over the Japanese yen, and I do think ultimately that is the story here and with rates rising in America during the day, that only adds more pressure to the upside. Given enough time, I do expect a breakout but when you're talking about a breakout that goes all the way back to 1990, it's going to take a lot of effort.
The Bank of Japan recently intervened and they may do so again, but ultimately, they will lose. Central banks when they intervene like that generally don't change the direction they just slow down progress and that I think is what happens here. I'm a buyer but if we break down below 156 yen, I'll just wait for another opportunity.
Potential signal: I am a buyer of this pair, with a stop loss below 156. I would aim for 159.33 above.