The US dollar initially plunged against the Japanese yen during early trading on Friday but turned around to recapture all of those losses and then some.
The US dollar initially fell during the trading session on Friday, perhaps in a way to protect yourself heading into the jobs number. That being said, the market has turned around quite drastically, as the market has seen a complete turnaround, and therefore it looks like we remain very bullish. The market could go looking toward the highs again, and quite frankly this remains a “buy on the dips” scenario.
The interest rate differential between the United States and Japan continues to be as wide as possible, and I just don’t see how this changes anytime soon. After all, the Bank of Japan has shown absolutely no proclivity whatsoever to turn things around and tighten monetary policy, and furthermore, we had seen the bond market do a complete turnaround during the day. With that in mind, it makes perfect sense that we have seen this happen. I think this remains a bit of a “buy on the dips” type of situation, and therefore I remain bullish on this pair. That doesn’t mean that we won’t get the occasional pullback, but I do think that eventually we break out to the upside and go looking toward the ¥150 level, after breaking through the ¥147.50 level.
Underneath, we have the 50-Day EMA near the ¥144 level that is rising and should offer quite a bit of support. The absolute “floor in the uptrend” at the moment for me is at the ¥142.50 level, an area that we are nowhere near threatening at the moment. With this, I look at every time the market pulls back as a potential buying opportunity.
Monday is Labor Day in the United States so you’ll have to be cautious about the lack of liquidity that we will almost certainly see, so be cautious with your position sizing but recognize that the market will almost certainly continue to favor the upside in general. You may be better off waiting until Tuesday, but at this point it certainly looks like we will eventually go higher, and therefore I have no real thought of shorting this market 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.