The U.S. dollar remains steady against the yen on Wednesday, holding above ¥150 support. Analysts expect continued upside toward ¥153–¥155, citing strong rate differentials and Bank of Japan policy, with dips viewed as long-term buying opportunities.
- The U.S. dollar has been a little bit noisy during the trading session here on Wednesday, but really not a lot has changed if you look at it through that prism.
- All things being equal, I think you've got a situation where traders are looking at this through the prism of a market that does pay you to hang on to the trade to the upside.
The ¥150 level has shown itself to be important multiple times, with the ¥150 level being resistance previously and then offering support when we fell on Friday to turn around and form a hammer. All things being equal, if the market were to break above the ¥152 level, then it's possible that we could go looking to the ¥153.25 level.
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Interest Rate Differential and Swap Pays
Over the longer term, I do anticipate that the ¥155 level will be targeted, possibly even higher than that. The 50-day EMA currently sits right around the ¥149 level and is rising, and should end up being a nice buying opportunity. Ultimately, this is a market where I think the interest rate differential continues to pay.
Therefore, you have to look at this as a market that is trying to go much higher over the longer term. Eventually, I think each dip gets bought into, and with the Bank of Japan in a situation where they are probably going to have to stay pretty loose, I think you've got a situation where we just cannot go in any other direction. For what it's worth, the U.S. dollar is strengthening against most currencies, so I like this as a buy-on-the-dip scenario.
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