Falls to Test the ¥130 Level

Ultimately, I do think that we will find buyers, but there are also a lot of concerns around the world when it comes to credit, so I think there is going to be a significant amount of volatility not only in this market but many others. 

• The USD/JPY has fallen significantly on Friday to show signs of hesitation in its resumption of any type of uptrend.
• In fact, the market has plunged down to the 130 in level, an area that obviously is a large, round, psychologically significant figure, and an area that would attract quite a bit of attention from traders around the world.
• With, there is a lot of noise underneath that could also offer support, with the double bottom near the ¥127.50 level being an area that a lot of traders will have to pay close attention to.

With all this being said, keep in mind that a lot of what is moving this market is going to be interest rates around the world, with the Bank of Japan still working with its yield curve control, and therefore it’s worth noting that as rates go higher around the world, that will put quite a bit of pressure on the Bank of Japan to keep the 10-year JGB yield at 50 basis points or lower. On the other hand, if rates start to fall as they have been recent, that puts a lot less pressure on the Bank of Japan, and therefore the Japanese yen will start to strengthen as they are not going to have to step in and print more currency to buy more bonds. Because of this, this market is running almost ticker tape with the 10-year JGB rate, and of course the overall attitude upon markets around the world.

Ultimately, I do think that we will find buyers, but there are also a lot of concerns around the world when it comes to credit, so I think there is going to be a significant amount of volatility not only in this market but many others. Nonetheless, I still believe that there is a lot of support underneath, at least in the meantime. The 50-Day EMA sits right around the ¥133.50 level and is dropping so that could offer a little bit of resistance.

 After that, then we could go to the ¥137.50 area. Breaking down below the double bottom near the ¥127.50 level, then things could get rather ugly. All things being equal, I think the only thing you can probably count on is a lot of noisy and erratic behavior here.

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