Tight trend line against the yen

The US dollar fell a bit during the session on Tuesday, as it continues to hold the same trend line as it was a while ago.

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The market is hovering around the crucial ¥138 level, which extends down to the ¥137.50 support level. If we break above all of that, we have the 200 day EMA, which is at ¥135. It is at that point that I think that a move below that level would break down and send the market much lower.

Given that we are between the 50 day EMA and the 200 day EMA, there is often noisy behavior before the market pulls back in one direction or the other. If the system breaks above the 50 day EMA, the rally will continue. ascending trendline wider, and maybe try to get back to the ¥150 level. The market has been on an uptrend line for years as the Bank of Japan is controlling the yield curve, i.e. buying bonds to maintain the interest rates further down, they print more currency. In other words, the market has been flooded with Japanese yen this year. Whether or not this will continue remains to be seen, and obviously there is a lot on the other side that could turn the market around. Check the price of the USD/JPY pair today.

Regarding all of the above:

  • A lot of Forex traders they focus on the Federal Reserve and the fact that it may be preparing to slow interest rate hikes, as there has already been a lot of tightening.
  • The question now is whether there could still be reasons to slow rates, which would negatively increase the value of the US dollar, thus easing pressure on the Bank of Japan, meaning that the inflation numbers will continue to be too high.
  • With the above, the Federal Reserve will hold out longer.
  • I suspect that will be the case, but right now the market continues to look for some type of reason to easer.

With core PCE data to be released on Thursday and employment data on Friday, expect more volatility as the week progresses as it will give us insight into what the Federal Reserve needs to do next.

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