US Dollar vs Japanese Yen Technical Analysis
The U.S. dollar initially pulled back just a bit against the Japanese Yen, only to turn around and show signs of life. We tested the 50-day EMA before pulling back just a bit, but ultimately, this is a pair that I think has offered enough value that people have begun to get involved yet again. The 155 yen level underneath, of course, is an area that I think a lot of people will be paying attention to as it is a large round, psychologically significant figure, and an area where we’ve seen buyers step in previously. With this being said, the market is likely to go looking to the 160 yen level, which is a large round figure as well.
All things being equal, this is a market that I think as the interest rate differential continues to favor the United States, we will continue to see this market rally quite a bit over the longer term. We have recently seen the Bank of Japan get involved, but this is just a band aid really for Japan in what is a bigger wound. They simply can get involved to slow the ascent of the dollar against the yen down, but to change the fundamentals, they just can’t do.
The interest rate differential is huge, and that’s because Japan simply cannot raise rates with the amount of debt that Japan has. The 155 yen level underneath is massive support, so if we were to somehow break down below there, it would obviously be a big deal. But I think at this point we are in the midst of stabilizing and if we can take off to the upside, perhaps clearing the 158.40 yen level, then the floodgates open and the buyers rush in.
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This article was originally posted on FX Empire
