The US dollar has rallied again during the day on Friday as we continue to see the USD/JPY pair rally rather significantly. We broke above the ?137 level at one point during the day on Friday but gave back a bit of the gain as this is an area that’s been focused on previously and offered a certain amount of downward pressure then. Looking at this chart, it’s obvious that we are getting just a little bit extended, but I think the trend is still very bullish.
The 50 Day EMA sits at the ?134 level and should continue to attract a lot of attention in and of itself. Even if we break down below there, then the ?132 level is an area where you would expect to see a lot of support also. This is a market that I think continues to see a major move to the upside given enough time, but this will also be dependent on the bond markets in general. After all, the interest rate differential between the 2 countries continues to be quite wide, and therefore it makes quite a bit of sense that people would favor the greenback.
On the upside, the ?140 level is an area where you would expect to see a bit of psychological resistance, and it looks like we are going to try to get there eventually. If we break above that level, then obviously that would be a very bullish sign. The US dollar has gotten quite strong over the last couple of days, so it’s not a surprise to see it do the same thing over here.
The Bank of Japan continues to work against interest rates and that country, trying to keep the 10-year yield at 0.25% or below. They are essentially “printing currency” every time they buy bonds, and therefore it makes sense that more supply would be negative for the value of the Japanese currency.
The US dollar is the favored currency around the world, while the Japanese yen is one of the least wanted.This is essentially the “perfect storm” for market conditions as they stand right now.It’s not until we break down below the ?130 level that I would be concerned about the overall trend in this pair.
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