Continues to See Buyers Against Yen

Traders should exercise prudence and seize opportunities as they arise. 

• The USD/JPY exhibited a modest rally during Friday’s trading session, driven by the Non-Farm Payroll announcement. This development has added a level of uncertainty to the market, as participants attempt to decipher the next move.
• However, I firmly believe that this currency pair will trend higher, especially considering the proximity to a significant support level represented by the top of a previously established ascending triangle pattern.
• The market has started to attract buying pressure, and the interest rate differential continues to favor the US dollar.

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The Bank of Japan remains committed to keeping interest rates low, which will likely contribute to further weakness in the Japanese yen. With the 50 basis point rate cap on the 10-year Japanese Government Bond (JGB), the Japanese authorities will likely inject more Japanese yen into the market through bond purchases. This dynamic suggests that the market will continue to entice traders to “buy on the dip.” As a result, I believe it is only a matter of time before we see levels around ¥140, and potentially even ¥141.

In terms of upside targets, based on the measured move of the triangle pattern, the market could potentially reach as high as ¥148 over time. However, it is important to note that reaching this level may not occur immediately. Traders are likely to identify value opportunities along the way and capitalize on them. Nonetheless, if we were to break below the bottom of the ¥138 level, we would encounter the 50-Day Exponential Moving Average (EMA) around ¥137, which could act as additional support.

Ultimately, the current situation calls for patience and allowing the market to unfold naturally. The path forward may involve gradual price appreciation rather than an overnight surge. Traders should exercise prudence and seize opportunities as they arise. However, breaking below key support levels could alter the outlook and warrant a reassessment of the situation.

Ultimately, the US dollar’s rally against the Japanese yen, driven by the Non-Farm Payroll announcement, has introduced some uncertainty to the market. Nonetheless, the US dollar is likely to continue its upward trajectory, supported by a significant level of buying pressure and favorable interest rate differentials. The Bank of Japan’s commitment to low rates will contribute to the weakening of the Japanese yen. While upside targets exist, traders should remain patient and adaptable. It is essential to monitor key support levels and make informed decisions based on market dynamics.

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