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US Dollar vs Japanese Yen Technical Analysis
The US dollar has rallied slightly during the trading session on Thursday to show signs of life, as we continue to see more or less a “buy on the dips” mentality. This was especially true given that the CPI numbers came out hotter than anticipated, and it does make a certain amount of sense that we will continue to see people run toward the US dollar as interest rate differential will favor it well above the Japanese yen.
Remember, the Bank of Japan is doing everything he can to drive down yields, and therefore it is one of the few central banks in the world that remains loose with its monetary policy. This obviously has a very negative connotation for the currency itself, and I think that plays out over the next several weeks.
Underneath, the ¥147.80 level is an area of previous support, and an area where we’ve seen buyers come back into the picture. The 50-Day EMA of course is an indicator that a lot of people pay close attention to, and it is racing toward the ¥147.80 level. The market continues to see a lot of value hunting on dips, and therefore it’s likely that we continue to see the US dollar show resiliency from time to time, although it has been very noisy. That’s a microcosm of leasing in the FX markets as of late, as it looks like people just have no idea what to do with themselves.
Currently, we have a huge argument between the reality of hard data, and the narrative of how the Federal Reserve is going to come and save everybody. That seems to be a very difficult thing to work against, it’s almost like being gas lit from people trying to sell you things. At the end of the day, the only thing you can do is trust the longer-term trend, which clearly favors the upside at this point. With this, I look for short-term values that I can take advantage of on pullbacks. I have no interest in selling this pair, because quite frankly I do not want to own Japanese yen.
For a look at all of today’s economic events, check out our economic calendar.
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