During Friday’s trading session, the US dollar saw a very tiny increase, suggesting that we may be attempting to break above the weekly shooting star from the previous week. When everything is said and done, we could be able to move considerably higher, possibly approaching the ¥155 level, if we do break over the ¥152 level. It is my expectation that the interest-rate differential will remain a major factor in this scenario, with the ¥150 level providing considerable support below it.
Generally speaking, this means that investors will still be purchasing the market when it declines since the interest rate differential will continue to push prices higher. The 50-Day EMA, which has behaved somewhat like a trendline, guards against further down. Given this, I believe that a breakdown below that level would result in a little decline, possibly reaching the ¥147.80 mark.
When everything else is equal, I do believe that the market is attempting to concentrate on the Bank of Japan, despite the fact that they have no desire to attempt raising interest rates. If everything else stays the same, the markets will keep focusing on the fact that many investors have been long this market for some time and that they get rewarded at the end of the day for holding this pair.
Because Japan is among the world’s most indebted countries, the interest-rate policy in Tokyo will be hindered, and the markets will continue to see lots of interest beneath. The Bank of Japan may periodically rattle the markets, but it doesn’t indicate they will take any concrete action since rising interest rates will make debt a significant issue in Japan. The Federal Reserve and whether or not interest rates in the US continue to rise are key factors in all of this. It appears that they will continue to rise, which will benefit the US dollar.