USD Pulls Back Against the JPY

Looking at the start, it’s likely that we reach ¥140 given enough time.

The US dollar has pulled back a bit against the Japanese yen during the trading session on Tuesday as we continue to see a lot of back-and-forths. That being said, the market is still very positive from a longer-term standpoint, and therefore I’m looking at this as a situation where you try to find value in the US dollar.

The ¥138 level above is a large, round, psychologically significant figure, and therefore could be a bit of a target. If we reach that area, it could cause a little bit of resistance. That being said, if the market does pull back from here even further, then it would make quite a bit of sense that we could see buyers near the ¥135 level. Keep in mind that there is a trend line underneath there that should come into the picture, but this is a market that is running purely on fundamentals, and not technical analysis.

The Bank of Japan does everything it can to buy all bonds necessary to keep the 10 year JGB under 0.25%, meaning that it is doing quantitative easing. It’s the only major central bank doing that at the moment, and therefore it’s likely that we will see plenty of people taking advantage of any type of value that comes along. After all, the US dollar is by far the favored currency for traders around the world, and that should continue to be the case. In fact, you don’t even have a scenario in which I would short this market unless, of course, the Bank of Japan changes its attitude. If the Federal Reserve were suddenly going to be very loose with its monetary policy, they could make it happen too, but I doubt that’s coming anytime soon.

The 50 Day EMA sits at the ¥132 level and is rising. That could cause a certain amount of value hunting to come into the market, but it would be a bit difficult to see this market even get down to that area as we have seen so much in the way of upward pressure. At best, we are probably looking at a situation where we might go sideways, but that’s probably about as negative as we are going to get any time soon. Looking at the start, it’s likely that we reach ¥140 given enough time.