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Likely to Pull Back to Find Value

While I am bullish on this pair, I also recognize the need to find value. There is likely to be some back-and-forth movement in the market in order to digest some of the gains.

  • During Friday’s trading session, the USD/JPY pulled back slightly, with the market appearing to head towards the ¥136 level in the short term.
  • It’s worth noting that the Wednesday candlestick was a hammer that bounced off the psychologically significant ¥135 level, setting up a potential signal.
  • However, the ¥137.50 level represents a significant resistance barrier, and breaking through it could see the market moving towards ¥140.

The 50-Day EMA is currently positioned just below the 200-Day EMA, indicating the formation of a “golden cross,” which the market tends to pay close attention to from a longer-term perspective. This could potentially result in a move above the ¥137.50 level and towards ¥140. However, if the market were to break down below the moving averages, it would be a negative development, although this is considered less likely at the moment.

The market recently formed a double bottom near the 50% Fibonacci level, which longer-term traders may view as an ideal entry point. The Bank of Japan continues to print yen to keep interest rates low, which could create some noise in the market, but ultimately, if interest rates continue to rise around the world, the market is likely to move higher.

While I am bullish on this pair, I also recognize the need to find value. There is likely to be some back-and-forth movement in the market in order to digest some of the gains. However, pullbacks may represent good value opportunities. This will be especially true if we then see interest rates in either the United States or Japan start to rise again. Interest rates in general have been doing that more often than not, so this is why a look at DIPs as a potential buying opportunity.

In the end, the market for the US dollar and Japanese yen is likely to remain volatile in the short term, with a lot of attention paid to key levels such as ¥137.50 and the moving averages. Traders should exercise caution and be prepared for potential market noise, but pullbacks may represent good buying opportunities for those looking to enter the market at a bit of a discount as we continue to see the follow-through from the double bottom that printed a couple of weeks back. I have no interest in shorting this pair anytime soon.


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