- The US dollar has been stable against the Japanese yen during the trading session on Monday, which in and of itself is not necessarily anything markable, except the fact that we have seen the US dollar struggle against so many other currencies.
- Because of this, I suspect that there is a problem with the Japanese yen itself.
- After all, the Japanese yen is parentally weak, as the Bank of Japan is normally very loose with its monetary policy.
The Bank of Japan has a significant issue at the moment, due to the fact that there have been a lack of buyers in the Japanese Government Bond markets. This is a major problem for central banks and will almost always lead to more central bank buying of bonds, or what you probably know as “quantitative easing.” That’s an extreme simplification of what’s going on, but it is a very realistic example. By contrast, we have the Federal Reserve possibly cutting rates by 25 basis points in September, but that would still leave a major interest rate differential between these 2 currencies and make the dollar attractive against the yen itself.
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Technical Analysis
The technical analysis at the moment is somewhat flat, as we have been trading in a range for a couple of months. The ¥142 level on the bottom is an area of significant support, while the ¥148 level has been significant resistance. It seems as if the market is very comfortable near the ¥145 level, which is also attracting the 50 Day EMA. As the market has gone into a multi-month consolidation area, this tells me that we could possibly be trying to form some type of bottoming pattern. This could take months though, which would not be unusual for this currency pair.
If we were to break above the ¥148 level, that opens up a move above the 200 Day EMA as well and perhaps should send the USD/JPY pair to the ¥150 level. On the other hand, if we were to break down below the ¥142 level, then I suspect we revisit the ¥140 level relatively quickly.
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