The US dollar has fallen initially during the course of the trading session on Wednesday, but then turned around to show signs of life as we are hanging on to the uptrend line. All things being equal, this is a market that I think continues to see a lot of noisy behavior, but if interest rates turned back around, that would obviously send the market much higher. In that scenario, we could go racing toward ¥149.80 level, an area that has been a significant resistance barrier.
On the other hand, if we were to break down below the ¥146.50 level, which is ostensibly the same thing as breaking down below the bottom of the candlestick for the Wednesday session, could open up fresh selling down to the 200-Day EMA. In general, this is a market that I think continues to see a lot of noisy behavior, and will of course move based upon the idea of the overall interest-rate differential, which should remain rather high. Overnight, the Japanese Government Bonds dropped almost 10 basis points, which is a huge move for that market. If yields continue to drop like that in Japan, it could be a big deal.
All things being equal, this is a market that looks like it’s trying to find some type of support. Ultimately, I do think that a bounce could be coming, but it’s very cautiously optimistic at the moment, not necessarily something that I would jump in with both feet. I do expect a lot of noisy behavior, but at the end of the day, I still favor the upside until something fundamentally changes.
We have seen a significant amount of noise in the markets that people believe that the Bank of Japan is finally serious about raising rates, but they cannot do so with the amount of debt that Japan faces. Because of this, it is probably only a matter of time before he turned around. However, momentum is a a major driver of the markets, so therefore we just simply follow what the market is doing, not what it “should do.”
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.