Due to the Bank of Japan meeting, which only hinted at a potential interest rate increase, the US dollar saw a notable increase throughout Tuesday’s trading session. To put it another way, they did not entirely remove it, therefore the Japanese yen will likely continue to suffer greatly. Not only has it happened with the US dollar, but it has also happened with the Japanese yen versus nearly everything.
Of course, the magnitude of the candlestick tells a lot, and given enough time, I believe we will continue to move considerably higher, maybe challenging the ¥152 mark. In the end, the ¥152 level, which was a significant hurdle earlier, will likely provide some resistance for this market. However, if we can break through it, it’s probable that this pair will target the ¥155 level. Since the BoJ meeting has passed, the market will likely move mostly due to interest rate differentials.
The 50-Day EMA is still hovering around ¥147.80 down, and I believe it does provide some bottom. The market will view it as the current floor, and it would be clearly extremely unfavourable if we were to reverse course and collapse below that level. I would presume that the Bank of Japan had stepped in at that moment.
As of right now, I’m watching for quick declines to capitalise on the strength of the US dollar, and I believe that are likely just around the corner. Since this has been a pattern for a few months and I don’t see how it will change given the current interest rate disparity, I’m not sure I like the concept of getting too cutesy with it. At the end of the day, you are compensated to stick onto this pair, and one of the major benefits is still the “carry trade.” As a result, I stick around and try to offer more as this pattern continues.