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I have no interest in shorting this market, at least not until something fundamentally changes.
The USD/JPY rallied a bit during the trading session on Friday, especially after the Jerome Powell speech. The US dollar has been rallying quite significantly against the Japanese yen, and it looks like we are ready to continue doing more of the same. I think it is probably only a matter of time before we reach the highest, and then perhaps go up to the ¥140 level. The ¥140 level course is a large, round, psychologically significant figure that a lot of people will pay attention to.
Pulling back at this point in time only invites more buying, because the trend is still highly substantiated, and has been a major factor for so long. The 50-Day EMA sits below, near the ¥134.50 level. The market will continue to see that as a potential support level, and therefore I would be very interested in any drop toward that level. Even if we break down below there, I think there is plenty of support down to the ¥132 level. The ¥132 level has been important multiple times, and therefore it would not be surprising at all to see it serve as a floor.
Japanese Yen Likely to Continue Losing Value
- The Bank of Japan has repeatedly fought against rising interest rates, in an environment that demands them from multiple countries, and therefore it’s all about trying to work against the will of the market.
- This means that you would have to buy bonds in order to drive those yields down, which means you need to essentially print unlimited currency.
- By doing so, the market sees the Japanese yen lose value, as it is being flooded into the market.
On the other hand, we have the Federal Reserve looking to tighten monetary policy, which of course means that we are looking at a strengthening US dollar in general. We have been in an uptrend for quite some time, and it’s worth noting that the market has recently formed a “W pattern”, and that of course is a very good sign. In fact, we are still somewhat breaking out of the pattern, so a measured move could suggest that we could go as high as ¥140 relatively soon. Either way, I have no interest in shorting this market, at least not until something fundamentally changes. The Federal Reserve has reiterated that this trend should continue.
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