Pulls Back in a Major Uptrend

Recently, we tested the top of a triangle and then pulled back.

• The USD/JPY fell sharply on Wednesday as traders anxiously awaited the Federal Reserve’s announcement.
• The market is currently concerned about the future of the Federal Reserve and what Jerome Powell will say in his statement.
• As of now, we are unsure of the path that the Federal Reserve will take, but it is probable that we will see hawkish behavior.
• As a result, the trading public will likely try to “guestimate” where the Federal Reserve is headed next, and the market will continue to be volatile.

In contrast, the Bank of Japan is much clearer in its intentions to keep interest rates low. With that in mind, it is probable that this currency pair will continue to climb higher. Recently, we tested the top of a triangle and then pulled back. However, I believe that the ¥138 level will eventually be broken, and the market will go much higher. In the meantime, this pullback presents a potential buying opportunity down to at least the ¥133.50 level. The key is to be patient enough to wait for a bounce or signs of strength before getting involved.

In this market, I have no interest in shorting this pair anytime soon, unless the Federal Reserve abruptly decides to halt quantitative tightening, which is unlikely to occur. Keep in mind that it is possible for the Federal Reserve to “pause” for a while, but eventually, the interest rate differential will take over, and the market will correct itself back to the upside. In conclusion, it is important to anticipate a lot of volatility and keep your position size reasonable until we get through the next few days, which also include the ECB and the jobs number in America.

At the end of the day, it is important to be cautious and patient during these times of uncertainty. While the US dollar has experienced a significant decline in recent trading sessions, it is still possible for the market to make a comeback. With that in mind, it is important to wait for a bounce or signs of strength before investing in this market. Furthermore, it is essential to monitor the actions of the Federal Reserve and the Bank of Japan, as their decisions will greatly affect the direction of the market. Ultimately, traders should expect a lot of volatility and keep their position sizes reasonable until we get through the next few days.

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