US Dollar Sitting on Major Figure

The US dollar has pulled back a bit against the Japanese yen, as we have seen so much noise around the world. Inflationary concerns and whether or not the Federal Reserve continues to tighten for the longer term, or if they can only do so much. At this point in time, we are forming a bit of a triangle, and as a result the market looks as if it is going to explode in one direction or the other. That does make a certain amount of sense, as the most recent high was a bit lower than the one before it. However, the most recent low was higher than the one before that. In other words, we are building up inertia.

USD/JPY Video 08.02.22

A lot of this is going to come down to whether or not we are “risk on”, or if we are starting to become very “risk off.” The Japanese yen is considered to be “safer” than the US dollar, but you can also see the interest rates in the 10 year note drive this pair higher due to the fact that it makes the US dollar that much more attractive, especially against a low yielding currency like the Japanese yen. Historically speaking, that has been how this market has traded, but quite frankly most of the time it simply a matter of whatever the market is focusing on.

To the downside, the 50 day EMA is starting to curl higher right near the ¥114.50 level, and I think that does offer a significant amount of support. If we break down below there, then we could go looking towards the ¥113.50 level, an area that has already shown support. To the upside, we could go looking towards the ¥116.25 level, which was the most recent high, and anything above there becomes a “buy-and-hold situation.”

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