The USD has bounced all over the place this week against the yen, as traders continue to pray for loose monetary policy coming from the Fed. Not sure if it will happen, but things are starting to look, “broken.”
Taking a look at the US dollar against the Japanese yen it doesn’t seem like we really know where to go next as we are starting to see cracks in the US economy. But at the same time, the Japanese can’t do anything. So with all of that being said, I think you get a lot of noise in this area. And I do think eventually you could have a significant drop, but I think that pullback offers a buying opportunity.
The interest rate differential is still wide enough to drive a truck through. And therefore, I think you need to understand that getting paid to hold this asset, or this market, I should say, is a major deal. And if that’s going to continue to be the case, then I think you do have a situation where traders will take advantage of the potential value at the end of every day.
The US dollar of course is a place that people go to during times of chaos and we have plenty of it. That being said, the Japanese yen is also a safety currency so that does negate a little bit in this pair and we are trying to take out the area that the market had sold off from previously due to the Japanese intervention and playing with the market. So with that being the case I think you have to be very well aware of the fact that market participants probably don’t really know what to do.
And it looks to me like on Friday the Chicago PMI numbers, which is like such a nonsensical number, really set the markets into some kind of weird tailspin. So it’s all algorithmic driven right now. So I can’t read too much into it other than a dip should, at least in theory, offer value, but we’ll have to wait and see if we get a bit of a bounce.
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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.