Continues to See Long-Term Uptrend

The interest rate differential alone offers compelling reasons for the US dollar to remain strong against the Japanese yen. 

• During Tuesday’s trading, the USD/JPY experienced an initial decline, only to reverse its fortunes and show signs of life.
• All factors considered, I believe the market is eyeing the ¥145 level as a possible support point, which had previously posed as a significant resistance barrier.
• Additionally, the psychology surrounding the ¥145 level can’t be ignored—it holds considerable influence.

Beneath this, the ¥142.50 level has seen its fair share of activity before. Moreover, the 50-Day Exponential Moving Average comes into play right around there. This could serve as the market’s foundation, particularly when we consider the overall uptrend. However, it’s important to note that the next couple of days might be relatively quiet, awaiting Jerome Powell’s speech on Friday at the Jackson Hole Symposium. Right now, most traders are grappling with the question of whether the Federal Reserve will stick to its tight policy stance if it suggests.

At this juncture, the focus might shift towards finding value in dips, given that the Bank of Japan continues to keep its monetary policy exceptionally loose. In this context, I think the market is likely to view the ¥147.50 level as a potential target. If we manage to surpass that, the next objective could be reaching the ¥150 mark. However, it is worth noting that this market has a lot of noise ahead of it. The speech on Friday could be the next catalyst, so it’s possible that we simply grind back and forth between now and then – unless traders try to front-run the Fed and the speech, which they sometimes do. Quite often, it’s the wrong guess, as the markets are a place that runs on hope at times, in this case, for cheap money coming from the Fed.

The interest rate differential alone offers compelling reasons for the US dollar to remain strong against the Japanese yen. Yet, it’s not just the US dollar—it could affect other currencies like the British pound, Australian dollar, New Zealand dollar, Canadian dollar, and more. The Japanese yen might continue to be vulnerable against various global currencies. Hence, one thing I’m certain of is that I won’t be buying the Japanese yen against anything anytime soon. The prevailing trend firmly supports this notion, making the yen a likely target for other currencies’ advances.

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