The US dollar initially pulled back just a bit during the trading session on Thursday, but then turned around to grind higher yet again.
The US dollar initially pulled back just a bit during the trading session but then started to grind higher again. Ultimately, we are in a massive uptrend, and therefore I think we got a situation where we eventually make the target of the ¥148 level, an area that is the “measured move” of the bullish flag underneath, and then of course, the ascending triangle underneath there that suggest somewhere around the same area as well. In other words, this remains a “buy on the dip” type of market, as we have such a huge interest rate differential between the United States and Japan.
As long as the Federal Reserve remains very tight with its monetary policy, which it looks like it may even raise interest rates 2 more times this summer, and the Japanese continue to keep a loose monetary policy, there’s no real reason why this pair won’t go higher over the longer term. With that being the case, I think we continue to see more of the same, and I look at any pullback as an opportunity to pick up a little bit of value. The ¥142.50 level underneath is the short-term “floor in the market”, with the 50-Day EMA digging into the bullish flag that I mentioned previously.
Until the central banks change their monetary policies, it’s almost impossible for this market to drop from here, as you get paid to hold onto the US dollar, while you have to pay to hold onto the Japanese yen. Whether or not we get there quickly or not remains to be seen, but it certainly looks as if the market is going to continue to have plenty of upward pressure over the longer term, so there is no scenario in which I’m willing to start selling this market. Granted, it will change eventually, but we are probably several months away from that actually being the case. We are a little stretched, so any dip at this point in time will almost certainly be thought of as a buying opportunity by many traders around the world, which is something that I do not expect to change anytime soon.
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Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.