- The US dollar has gone sideways for the Friday session against the yen, as we are simply waiting to find a direction.
Top Regulated Brokers
Range-Bound Price Action Driven by Interest Rate Differentials
The US dollar has been very choppy during the trading session here on Friday against the Japanese yen as we continue to hang out and just simply wait to see what happens next with interest rates. It's worth noting that interest rates in America have drifted a little bit sideways, maybe a little bit lower overall during the last couple of days, and that has cooled this pair.
That being said, the interest rate differential still favors the US dollar, so I think pullbacks offer buying opportunities for the market to go looking to the 160-yen level. The 160-yen level is a major barrier that I think will be difficult to break above, but if we do, then it's possible that we go looking to the 160.50-yen level. Anything above there is a huge move to the upside, just waiting to happen.
The Interest Rate Differential
All things being equal, if this market were to break down below the 158-yen level, it would obviously be very negative. But really, at this point in time, I have no interest in shorting this pair, and I do think the markets will continue to be very noisy. I think they will continue to find plenty of buyers eventually, but it's also worth noting that as the interest rate markets cool off, it most certainly has an influence on how the US dollar will behave against everything, including the Japanese yen.
We are in a situation right now where traders are trying to figure out where to go next, but the reality is there's so much headline noise out there that it's difficult to put a ton of money in any particular position. However, I certainly have no interest in shorting because of the interest rate differential, and I'm just looking for cheap dollars.
Want to trade our USD/JPY forex analysis and predictions? Here's a list of forex brokers in Japan to check out.