The US dollar rallied a bit during the trading session on Monday, as we continue to see the US dollar recover a bit in general. The 200-Day EMA underneath has offered a bit of support over the last couple of days, so now the real question is whether or not we can break above the ¥147 level. If we can, then the market could really start to take off toward the ¥149.80 level. That’s an area that previously had been like a brick wall, so it’ll be interesting to see if we can get above there.
On the other hand, a short-term pullback does make a certain amount of sense, and it could send this pair down to the ¥145 level. The ¥145 level is obviously an area that a lot of people will be paying close attention to, right along with that 200-Day EMA.
It is worth noting that the Federal Reserve has an interest rate decision this week which will obviously have a major influence on where this pair goes. Furthermore, the following week features the Bank of Japan and its interest rate decision, which also will have a major influence on where this pair goes. I think at this point in time, you will just simply have to be cautious with your position size, but it certainly looks as if we have found quite a bit of support. Keep in mind that the interest rate differential still favors the US dollar, and even though that we have seen quite a bit of a turnaround over the last couple of weeks, in the big scheme of things the trend is still very much to the upside.
Honestly, I’m not expecting the Federal Reserve to do much this week, but it will be the statement and the press conference that people will be paying the most attention to. The real question will be whether or not the Japanese actually start to move toward normalizing interest rates? That remains a big source of contention among market participants, so expect a noisy week ahead at the very least, and then of course we have to worry about liquidity drying up as we head toward the holidays.
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.