Potential signal
- If we can break above 153.50 AFTER CPI numbers are released on Friday, I am buying with a stop at 152, and a target of 157.
The US dollar has initially tried to rally against the Japanese yen during the trading session on Thursday but then turned around to show signs of weakness. At this point, it looks like we are testing the 200-day EMA and ultimately, I think this is something that you need to watch very closely.
The 152-yen level is an area that's been supported and as long as we can stay above there, I think that we still have a chance that the US dollar will turn things around and rally. I'll be watching very closely after the CPI numbers on Friday as to where we go next because if we get hotter than anticipated inflation on top of hotter than anticipated jobs numbers in the United States, that could very well spin the narrative on its head.
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Debt Loads and Historical Resistance
Currently, people are expecting the Japanese government to have some type of unity and do everything we can to see some type of growth in Japan. But we also have to keep in mind that the Bank of Japan is stuck with a massive debt load that simply cannot be financed easily with higher interest rates. All things being equal, I think it's probably only a matter of time before we turn around, but I also recognize that it could take a certain amount of time to turn things around completely.
When you look at longer-term charts, there is an area right around 160 yen that goes all the way back to the 1990 or even the 1989 calendar year as major resistance. This pullback towards the 152-yen level looked through that scenario really isn't that big of a deal and therefore I think we have to still pay close attention to whether or not momentum can pick up. If the US dollar really starts to take off against other currencies, that could turn things around here as well.
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