The US dollar has broken higher against the Japanese yen during trading on Thursday as the CPI numbers in the United States came out much hotter than anticipated. Because of this, we could be entering a “buy-and-hold” market.
The US dollar has rallied rather significantly during the trading session on Thursday after the CPI number came out bigger than anticipated. Because of this, people are starting to price in more interest rate hikes when it comes to the United States, that of course has a major influence on what happens here. The Bank of Japan is light years away from doing anything remotely close to monetary policy tightening, so therefore it should not be a huge surprise to see the divergence play out in the currency markets. That being said, we are struggling a little bit at the previous high, but I think it is probably only a matter of time before we break out.
Short-term dips should continue to be buying opportunities in this environment, and therefore I think we have a situation where you must look at any pullback that shows any signs of support on shorter time frames as a potential buying opportunity. Because of this, the market is likely to be very choppy in the short term, but longer-term I do think that we probably go looking towards the ¥120 level based upon everything that we know now.
Underneath, I anticipate that the ¥115 level should be massive support, and a breach of that level to the downside would of course change a lot of things. Ultimately, this is a market that I do believe will eventually go much higher, simply because of inflationary dynamics. Having said that, if we get a sudden “run for cover” type of situation globally, sometimes people will buy the yen.
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Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.