During price pullbacks, there should be ample buyers waiting to enter the market, given the consistent interest demonstrated in previous dips.
- The USD/JPY demonstrated a modest rebound during Friday’s trading session, building upon the recovery witnessed on Thursday.
- Notably, the market tested both the 50-Day Exponential Moving Average (EMA) and the 200-Day EMA, garnering support from these technical indicators.
- Additionally, it is worth highlighting that the market is currently forming an ascending triangle pattern, capturing the attention of many traders.
- The upper boundary of this triangle presents significant resistance near the ¥138 level. A successful breakthrough at this level would serve as a highly bullish signal, with the “measured move” indicating a potential rise as high as ¥147.
The yen is a popular asset during turbulent times.
During price pullbacks, there should be ample buyers waiting to enter the market, given the consistent interest demonstrated in previous dips. Furthermore, the uptrend line stemming from the triangle formation will continue to provide support. Consequently, it becomes challenging to adopt an excessively bearish stance on this currency pair within the current environment. It is important to note that the market is also aware of the Bank of Japan’s ongoing yield curve control policy, which restricts the 10-year Japanese Government Bond (JGB) yields from surpassing 50 basis points. To achieve this, the Bank of Japan must purchase bonds, leading to an increase in the money supply. Consequently, the Japanese yen weakens, as observed for most of last year.
On the other side of the equation, we have the Federal Reserve. While they may be nearing the end of their interest rate hikes or may have already concluded them, there is no indication of a loosening monetary policy. This alone creates an attractive investment opportunity for traders engaging in the “carry trade,” capitalizing on interest rate differentials. Nevertheless, should the market break below the ¥132 level, it would disrupt the pattern of the ascending triangle, potentially leading to a more complex consolidation phase.
Nevertheless, it is evident that the market currently lacks genuine interest in selling off this currency pair. As a result, it remains advisable to view price dips as buying opportunities in anticipation of an eventual breakout to the upside. Traders should patiently await the opportune moment for the anticipated bullish move. I do believe that it is only a matter of time before the market climbs from here, perhaps going all the way back to the highs again.
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