Longer term, I do think that we go much higher.
- The US dollar has been somewhat choppy against the Japanese yen during the trading session on Thursday, as we are now well above that 147.33 resistance barrier that I’ve been talking about.
- In fact, as New York got down to business, the 148 yen level was tested, and we’ll have to see whether or not we can continue to go higher as a result.
Keep in mind, this is a pair that has shot straight up in the air over the last couple of weeks, so I do fully anticipate seeing some type of pullback in order to find value. All things being equal, the 50 day EMA underneath is an area that I would be paying attention to as well, which is sitting right around 145.50 yen. Regardless, I think every dip will attract a certain amount of buying pressure.
Longer term, I do think that we go much higher. I think we go looking toward the 149.80 level, but I don’t want to see it get there overnight, as it were. Quite frankly, this is a market that needs to pull back in order to attract more buyers. It’s all about the interest rate decisions coming out of Washington and Tokyo. And although the Federal Reserve is likely to cut rates a couple of times in 2024,
The reality is that the Bank of Japan continues to offer negative real rates and has shown no inclination whatsoever in changing that. Because of this, the Japanese yen will continue to be sold off against most currencies, not just the US dollar. And in fact, several other pairs right now are near highs again. So, I think the US dollar is just going to pay a little bit of attention to the yen and try to catch up to the other currencies at the moment.
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As we progress into 2024, I believe we’ve got a situation where the USD/JPY pair will continue to see a lot of questions asked about the Federal Reserve, as well as many other central banks. The one central bank that we do not need to guess much with is going to be the Bank of Japan as they remain loose with their monetary policy, and therefore the Japanese yen will continue to suffer as a result of fiscal behavior.