Gaps Higher to Kick Off the Week

I do think that it is going to be a very noisy market in the foreseeable future, but if we can break above the 200-Day EMA, then I think it’s likely that we go to the ¥138 level, possibly even as high as the ¥150 level over the longer term. 

• The USD/JPY gapped higher on Monday to kick off the trading week to slam into the 50-Day EMA.
• By doing so, it suggests that the market is going to continue to be bullish and that there could be buyers underneath.
• If we can break above the 200-Day EMA, then it should unleash a huge move to the upside.

There are a lot of concerns out there when it comes to the bond market for Japan as we have seen quite a bit of yield curve control. The only way they can do that is to buy more bonds, and that means that they will be printing more yen. Whether or not that continues to be the case remains to be seen, but clearly, we have a lot of noisy behavior to deal with, and therefore you need to be cautious about jumping in with huge positions.

Looking for a Short-term Bounce

I do think that it is going to be a very noisy market in the foreseeable future, but if we can break above the 200-Day EMA, then I think it’s likely that we go to the ¥138 level, possibly even as high as the ¥150 level over the longer term. While that does seem like a massive move to the upside, if interest rates around the world continue to rise, it’s going to be the same story that we had earlier, during the big move last year. Ultimately, this is a situation where we’ve had a nice pullback, but the overall added to the market should continue to favor the US dollar going forward, especially if we continue to see a lot of negativity and fear out there.

As the jobs number last Friday was much stronger than anticipated, the reality is that the Federal Reserve will have to stay tight for much longer than people thought, and therefore it is probably worth noting that the US dollar should continue to pick up momentum, as the Federal Reserve will have to do everything you can to squash inflation, despite the fact that there are more than enough jobs out there for Americans. In other words, they are going to have to be extraordinarily aggressive to make this happen. Don’t be surprised if the gap gets filled, but somewhere near the bottom of that gap I be looking for a short-term bounce that I can enter from.

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