The noise of the market has been extraordinary, and I think eventually something will break. When it does, I fully anticipate that the US dollar should continue to attract a lot of inflows.
- The USD/JPY has initially fallen a bit during the session on Friday, but it certainly looks as if it is going to continue to fight against the Japanese yen, and therefore I think we’ve got a situation where we may be building up a base.
- If that base continues to cause a significant amount of noise, then one would have to think that eventually, the greenback takes off to the upside.
- After all, it’s all about the interest rates these days, and the fact that the Bank of Japan is doing everything it can to fight rising rates in the 10-year yield.
The yen is a popular asset during turbulent times.
Looking at this chart, the 50-Day EMA sits just above, and of course we have the 200-Day EMA after that. Because of this, I would anticipate that this is a market ripe for some type of significant issue, and therefore I think people will go running to the US dollar as Japan will have to print quite a bit of currency to keep that 10-year yield down the 50 basis points. If they cannot, that could skyrocket the value of the yen, and that’s not something they need right now. But frankly, the Japanese economy is a bit of a mess, and I think that continues to be the main issue here.
US Dollar Will Continue to Attract a lot of Inflows
Breaking above the 200-Day EMA opens the possibility of an attack on the ¥137.50 level, which is an area where we had seen a lot of selling pressure. Breaking above that level then opens the possibility of going all the way to the highs. I do think that could eventually happen, and it is worth noting that we pulled back to the 50% Fibonacci level of the massive move to the upside. The noise of the market has been extraordinary, and I think eventually something will break. When it does, I fully anticipate that the US dollar should continue to attract a lot of inflows.
However, if we break down below the ¥127 level underneath, then the bottom falls out and I start to look at the possibility of dropping all the way down to the ¥115 level. In general, this is a situation that continues to be very noisy, but I do think that eventually we see upward pressure and as we are amid building a bit of a base, I think that continues to be the way to look at this market.