USD/JPY Weekly Price Analysis – US Dollar Continues to See Dip Buying

USD/JPY Technical Analysis

The US dollar fell pretty significantly during the trading week to reach the 158-yen level but then turned around to show signs of life again. In fact, it looks as if we are going to form our 4th hammer in a row on the weekly chart in this pair, and that is something that stands out obviously.

If we can break above the highs, it could be a significant move in the forex world that could last for years. Somewhere around the 160.40 level, there is a resistance line that goes back to 1990, and therefore, I’ve been watching this market very closely.

Structural Dilemma at the Bank of Japan

This is a market that will continue to see a lot of volatility and noise, but I also think that there is a very real structural problem with the Japanese yen right now. Basically, the Bank of Japan cannot raise rates to cover the debt that it has amassed. The Bank of Japan is essentially between a rock and a hard place.

The 4.30% level in the 10-year yield is what I’m watching because, as it rises, that typically lifts this pair as well as sinks a lot of risk appetite in general. This is a very interesting setup for me because 158 yen is definitely a support level and breaking down below there could open up a move down to the 156-yen level.

But that breakout, I think you’ll see perhaps, based on the measured move of the rounding bottom that goes back to 1990, a move to somewhere right around 245 yen or so. In other words, you’re talking about buying and holding, maybe even adding on the dip type of potential move for years.

The positive swap would also pay you the whole time. It would almost be like when I started in 2004, I believe, the carry trade was a huge thing; people would just buy this pair every time it dipped. We may be entering something that’s even more long-term than that. We’ll just have to wait and see, but a little bit of patience here probably goes a very long way.

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