After initially falling on Tuesday and touching the ¥145 level, the US dollar has since rebounded. I believe that this market will remain significant, therefore it will be interesting to watch how things turn out. With enough time, I believe the US dollar hits ¥147.33, but we also need to make it through the Federal Reserve’s central bank meeting on Wednesday. Since Wall Street prefers liberal monetary policy, the announcement will be scrutinised for any hint of it.
We may decline to the 200-Day EMA, which is located around at the ¥143.50 level, if the Federal Reserve does indeed adopt a loose monetary policy, or at least the concept of one. It seems that we could be looking for stability because during Friday’s trading session, we built a huge hammer there. However, this market may go towards the ¥149.80 level if we are able to break over the ¥147.33 level following the Federal Reserve meeting.
But bear in mind that the primary catalyst will likely be the market’s anticipation of the Bank of Japan’s announcement next week. After all, it’s probable that the market will continue to hear a lot of queries about when the Japanese would normalise interest rates, but I don’t think that will happen anytime soon. After all, the government cannot finance Japan’s current level of debt at a fair interest rate due to the country’s extremely large debt.
Stated differently, they need to strike a careful balance between rising debt and rising inflation. The Bank of Japan has been performing this dance for years, so even if they try to follow, I believe it will be challenging since the market would need to determine whether the Japanese are sincere. It’s also important to keep in mind that there will still be a significant interest rate disparity. I believe that part of what’s happening is that you are still compensated for holding this role.