USD Sees a Lot of Support Via Interest Rates

Buying USD/JPY above 135 is an opportunity to go long.

• The USD/JPY currency pair has seen some buying pressure after better-than-anticipated jobs numbers on Friday, reinforcing the idea that the Federal Reserve will remain tight for longer.
• This makes it more likely that the US dollar will continue to rise over the longer term, particularly against the Japanese Yen, which has been subject to quantitative easing from the Bank of Japan.
• The BoJ still fights rising rates, despite the fact that the rest of the world is pushing for them.

The Bank of Japan is continuing to fight rising rates and purchasing JGBs, specifically the 10-year yield. This process results in the printing of more currency and makes it more likely that the Japanese Yen will suffer at the hands of currencies with more aggressive central banks, such as the US dollar. The ¥135 level is psychologically important and if the market can stay above that level on a daily close, it’s likely that the overall bullish behavior will continue, potentially reaching toward the ¥138 level.

The ¥138 level is significant as it is the top of the overall consolidation triangle and a break above it could lead to a much bigger move. However, if the USD/JPY currency pair were to turn around and break down below the ¥132.50 level, then it’s likely to see significant selling pressure, potentially leading to a move down to the ¥130 level.

While the US dollar is showing signs of strength against the Japanese Yen, it’s important to keep in mind that the forex market is subject to a variety of factors beyond just the Federal Reserve and Bank of Japan policies. The markets are currently trying to figure out where the risk appetite is, and whether it continues. With the bond market offering more interest rate moves to the upside, the pressure on the Yen will continue.

At the end of the day, the US dollar is showing signs of strength against the Japanese Yen, potentially reaching the psychologically important ¥135 level and even the ¥138 level. However, the forex market is subject to a variety of factors beyond just central bank policies, and traders should remain vigilant and prepared for potential changes in the market. Being cautious is the most important thing you can do at the moment, as the markets are clearly very noisy. This pair won’t be any different.

Buying USD/JPY above 135 is an opportunity to go long. The target would be 137, with a stop loss at 134.25

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