It is worth noting that the Bank of Japan continues its yield curve control, ensuring that interest rates stay at 50 basis points or less on the 10-year note.
- The USD/JPY initially tried to rally in recent trading sessions but has struggled to maintain gains above the 200-Day EMA.
- The tightness of the candlestick shows just how uncertain the market is, and the fact that the 50-Day EMA sits just below it indicates potential support.
- However, investors must make a bigger decision, and if inflation and interest rates continue to rise over time, we could see the market race higher. If this happens, the most obvious target would be the ¥135 level.
The yen is a popular asset during turbulent times.
It is worth noting that the Bank of Japan continues its yield curve control, ensuring that interest rates stay at 50 basis points or less on the 10-year note. The Bank of Japan will have to print more currency if it is to defend this level, which could flood the market with supply and lead to a drop in the value of the yen. While we have recently formed a double bottom, as we did before the last shot higher, we must defend the ¥130 level underneath it to show signs of life.
As the CPI number came out lower than anticipated on Wednesday, it caused a lot of volatility, but at the end of the day, the trend seems to be changing overall, and the single data point isn’t going to be enough to send the market reeling.
Despite this, investors should approach this market with caution, as the volatility of this pair can get out of control at times. This will be especially true if traders start to worry about the overall global growth situation, and if the bond market starts acting up again. Therefore, investors should position size accordingly, while remaining mindful of the significant upward pressure that could prevail in the future. If the market breaks above the ¥135 level, it could very well look toward the ¥137.50 level as a target.
Overall, the US dollar is likely to remain volatile amidst concerns over global growth and inflation. Investors should pay close attention to the Bank of Japan’s yield curve control and the potential for currency printing, while also monitoring the technical factors affecting the market. With careful analysis and strategic planning, investors can navigate these markets and capitalize on opportunities as they arise.
Potential signal: above 134, go long with a stop at 133. The potential target could be as high as 138, but for those more risk-averse, the 136 level should suffice.
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