Unless the Bank of Japan or the Federal Reserve change their attitudes, it’s difficult to imagine how this market will do well.
The USD/JPY currency pair initially fell Tuesday against the Japanese yen, but we have seen a turnaround as the Bank of Japan will continue to loosen monetary policy. With that in mind, it makes quite a bit of sense that the US dollar continues to climb as the Federal Reserve is so tight with its monetary policy.
The yen is a popular asset during turbulent times.
That being said, I think it is probably only a matter of time before we see this market go looking to the ?140 level. The ?140 level is a large, round, psychologically significant figure, and it’s likely that we will continue to see a lot of buyers jumping into this market every time they get an opportunity to pick up a little bit of value.
If we do break it down through here, the ?136 level is an area where there could be quite a bit of support. After that, we have the 50-Day EMA coming into the picture that could kick off a bit of support. Ultimately, this is a market that I think will see a lot of volatility, but it still makes quite a bit of sense that we have the uptrend very much ensconced, so I think that you have to look at this through the prism of picking up value. The US dollar continues to strengthen against almost everything else, and the Japanese yen is particularly vulnerable as the Bank of Japan continues to loosen its monetary policy. This is a situation where it’s a “one-way trade”, and until something fundamentally changes, it’s difficult to imagine how the trend will change. This is not to say that we can’t get the occasional significant pullback, just that I would anticipate more of an interest in buying than selling.
If we were to break down through the 50 Day EMA, then it’s possible that we could drive, perhaps down to the ?128 level. The ?128 level is an area where we have seen support a couple of times in the past, so I would also expect that to be an area where we could turn back around. Unless the Bank of Japan or the Federal Reserve change their attitudes, it’s difficult to imagine how this market will do well. We have seen a little bit of a drop in yields for American bonds, but that is short-term.