- During the trading session on Monday, we have seen the US dollar fall significantly, only to turn around and show signs of life again.
- All things being equal, it is worth paying close attention to the ¥143.50 level, an area that was short term resistance before, and is now starting to offer a little bit of support.
- Furthermore, we have a lot of headlines out there that could cause all kinds of problems for currency pairs.
- This is especially true for the USD/JPY pair, as it is so highly sensitive to risk appetite in general.
Technical Analysis and the Federal Reserve
If we can break above the 50 Day EMA, marked in red on the accompanying chart, and sitting at the ¥146.33 level, I think there’s a real shot that the US dollar continues to go much higher. All things being equal, I suspect that we will probably go more sideways over the next several sessions, especially as the FOMC meeting and announcement comes out on Wednesday, which makes the market take a bit of a breather as we will have to wait to see what the Federal Reserve says.
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It’s not so much what the Federal Reserve does, because they are not expected to cut interest rates, but it is going to be more or less the statement and the press conference that gives people the idea as to where the Federal Reserve may go with interest rates.
The Bank of Japan has already essentially flinched, meaning that they did not tighten monetary policy as they were worried about the overall tariff war, and this of course might be the excuse that lot of businesses and central banks use. In fact, we are already seen on Wall Street, with corporations using that as a way to get out of giving guidance. In general, I think the real story is that the Japanese cannot tighten rates, and the US dollar should rise over the longer term.
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