- The U.S. dollar rebounded from support near ¥153 on Wednesday, holding firm amid persistent yen weakness.
- With resistance at ¥154.50 and potential toward ¥155, I remain bullish, favoring dips as buying opportunities given Japan’s dovish stance.
The U.S. dollar initially fell against the Japanese yen during trading on Wednesday to test the crucial ¥153 level. That being said, the market has found that area as important, which is not a huge surprise considering that it was the previous resistance barrier. Therefore, we would have to think there's a certain amount of market memory in this region.
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By dropping initially only to turn around and show signs of strength, we are now threatening the ¥154.50 level, an area that's been like a brick wall over the last week or so. If we can clear that area, then the ¥155 level suddenly comes into the picture. Anything above that, and we really start to take off to the upside. Don't forget that the interest rate differential between the United States and Japan continues to be very wide, and therefore, you get paid quite nicely at the end of every day to hold this pair. The Japanese yen has been selling off not only against the U.S. dollar but almost every other currency that I follow as well.
BoJ is Stuck
Simply put, the Bank of Japan continues to show a lot of hesitation, and therefore, I think the market anticipates that they won't be able to do anything anytime soon. All things being equal, this is a market that will continue to see a lot of choppy volatility, but short-term pullbacks open up the possibility of finding a little bit of value, just as we had seen during the beginning of the Wednesday session.
If we were to break down below the ¥153 level, then it's possible that we could go looking to the ¥151.50 level. That is an area where you would start to think about intersecting with the 50-day EMA, which, of course, is an indicator that a lot of people watch closely. Ultimately, this is a market that I've been bullish on for several months, and I think that is going to continue to be the way forward. I have no interest in buying the yen in this environment.
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