The US dollar has been noisy again against the Japanese yen during the trading session on Monday as the 160-yen level is an area that I think a lot of people will watch as it is basically the area where the Bank of Japan has intervened previously.
And of course, it is basically the 1990 swing high.
That being said, the USD/JPY market breaking above the 160.75 level should send this market flying. Interest rate differentials still favor the United States dollar over the Japanese yen, which makes a certain amount of sense as traders are going to continue to see quite a bit of volatility.
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Technical Support and Central Bank Outlook
But I think, all things being equal, this is a market that even if we do fall from here, the 50-day EMA sits at the 158.76 level that offers support for the greenback, as technical traders will be paying attention to it.
I have no interest whatsoever in shorting this pair. It is a market that I think will continue to see plenty of interest rate traders watching. And of course, the carry trade is very much alive.
The market continues to see a lot of traders willing to come in and pick this up, and I do think that if we break out to the upside, it could lead to a much longer-term trade, maybe even all the way as high as the 220-yen level over the next several years.
I like this market to the upside, but the question now is whether or not the Japanese central bank will intervene. They are expected to raise rates by 25 basis points, but quite frankly, they'll be hard-pressed to do anything more than that.
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