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It is important to consider the monetary policies of the Bank of Japan and the Federal Reserve.
- During Wednesday’s trading session, the US dollar experienced a slight initial decline against the Japanese yen, following the recent upward pressure in the market.
- However, a pullback was deemed necessary after the prolonged upward trend.
- While the long-term outlook suggests continued upward pressure, it is important to note that markets cannot sustain a unidirectional movement indefinitely.
If the bottom of the candlestick for Wednesday’s session is breached, the US dollar may decline toward the ¥138 level, which represents the top of the previous ascending triangle formation. This level holds significant “market memory” and could attract attention from traders. However, reaching this level is not guaranteed. On the upside, the ¥140 level carries psychological significance and has previously served as a resistance point. It is likely that some hesitation may be observed around this level. Once a breakthrough occurs, the US dollar could continue its ascent, potentially targeting the ¥148 level based on the measured move. Even if a breakdown below ¥138 occurs, the 50-Day EMA is expected to provide substantial support.
It is important to consider the monetary policies of the Bank of Japan and the Federal Reserve. The Bank of Japan continues to implement an ultra-loose policy, while the Federal Reserve appears inclined to maintain a tight monetary stance for the foreseeable future. Given this divergence, it is logical to expect further upward momentum in the US dollar against the Japanese yen. Consequently, attempting to short this market is unappealing. With time, it is likely that the market will reach the ¥148 level, fulfilling the measured move of the previous triangle formation. Despite uncertainties in the global economy, the Federal Reserve remains resolute in its commitment to tight monetary policy, which could further support the US dollar’s upward trajectory.
In summary, the US dollar has encountered slight initial downward pressure against the Japanese yen, necessitating a pullback after sustained upward momentum. While a decline toward the ¥138 level remains a possibility, the 50-Day EMA is expected to offer support. The divergent monetary policies of the Bank of Japan and the Federal Reserve favor continued upward pressure for the US dollar. Attempting to short this market is impossible, as the Federal Reserve maintains a tight monetary stance. With time, the US dollar may reach the ¥148 level, fulfilling the measured move of the previous triangle formation.
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