Continues to Flex Muscles Against the Yen

The US dollar initially faced resistance against the Japanese yen on Wednesday but managed to rebound, demonstrating renewed strength. 

• The USD/JPY  faced initial resistance against the Japanese yen in Wednesday’s trading session but managed to reverse its course, indicating a renewed sense of strength.
• This turnaround demonstrated the prevailing “buy on the dip” mentality in the market, pushing the currency pair towards the ¥141 level that had previously served as a retreat point a few weeks ago.
• The possibility of breaking through this level creates an opportunity for a significant upward movement, solidifying the recent pullback as a crucial test of the upper boundary of the long-standing ascending triangle formation, a key pattern in this market. Considering the broader perspective, I maintain a bullish outlook on this currency pair.

This positive sentiment will receive a further boost if the Federal Reserve decides to raise interest rates again or adopts a generally hawkish stance in the upcoming week. Such actions could potentially drive the market even higher. Suppose the ¥141 level is successfully breached. In that case, the market is likely to transition into a “buy-and-hold” scenario, with our target shifting towards the ¥148 level, representing the measured move of the ascending triangle formation.

On the other hand, if the market experiences a breakdown below the ¥130 level, there is a possibility of testing the 50-Day Exponential Moving Average (EMA), a widely monitored technical indicator that could provide support. However, descending below this threshold would undoubtedly carry negative implications. Nonetheless, it is highly unlikely that such a scenario will unfold unless the Federal Reserve’s interest rate statement or future outlook yields unexpected surprises. In the event of unforeseen circumstances, the market dynamics could change dramatically. However, at present, it appears more likely that we will witness a period of choppy behavior rather than any significant developments.

TLDR: the US dollar initially faced resistance against the Japanese yen on Wednesday but managed to rebound, demonstrating renewed strength. The prevailing sentiment of “buy on the dip” prevailed, driving the market towards the ¥141 level, which had previously acted as a significant retreat point. A successful breakthrough above this level would pave the way for further upward momentum, confirming the recent pullback as a test of the upper boundary of the long-standing ascending triangle formation, a prominent pattern in this market. With the potential for the Federal Reserve to raise interest rates or adopt a hawkish stance in the coming week, the market could experience even greater upward movement.

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