The US dollar initially fell against the Japanese yen on Thursday, but found enough support near the 112.50 level to turn around and bounce. I think that the market will continue to find buyers underneath, so I am interested in buying the dips. I think that the interest rate differential will continue to favor the US dollar, as the Bank of Japan is light years away from raising rates. On the other hand, the Federal Reserve looks likely to tighten monetary policy, and that suggests to me that this pair should go higher. Keep in mind that this pair is also very risk sensitive, so I think that the stock market should be paid attention to, as if they rise, it typically puts bullish pressure in this market.
I believe in buying dips, and those dips are buying opportunities in so much as they offer value. Given enough time, we should go to the 114.50 level above, which is a massive resistance barrier that extends to the 115 handle. A break above the 115 handle would signify that it is more of a “buy-and-hold” market just waiting to happen. Given enough time, that should send this market looking towards the 120 level, but obviously that would take some time to get to.
If we were to break down below the 112 level, I think that the 111-level underneath would be targeted as it is even more supportive. Either way, I don’t have any interest in shorting just now, as I think that the buying pressure should continue. Ultimately, I believe that the buyers will prevail but I also recognize that this pair is quite often very volatile, and of course can cause a lot of issues. Because of this, caution is advised, but I remain bullish.
Written by FX Empire