The US dollar rose during trading on Friday as we continue to see the Japanese yen sell off.
Furthermore, we've seen inflation numbers in April drop in Japan and that takes away some of the potential need for the Bank of Japan to tighten monetary policy, and if that's the case, that will keep the Japanese yen somewhat weak.
Furthermore, we have the Federal Reserve in a situation where we may or may not cut rates, but overall, I think we're going to continue to see a massive interest rate differential between these 2 currencies and therefore, I think it makes a lot of sense that we remain bullish. This is a market that I prefer to “buy the dip.”
Top Regulated Brokers
160 Yen Still Matters
But you also need to keep in mind that the 160-yen level is an area that we have seen a lot of selling pressure at, especially when it culminated with the Bank of Japan intervening in the market. Because of this, I think you have to be very cautious. I think you have to understand that although it is a bullish market, it isn't like you're going to have a free pass to the upside.
I'd be very careful the closer we get to the 160-yen level, but I do prefer buying this market overall and I remain very bearish on the Japanese yen and then, by extension, very bullish on the US dollar. At this point, I have no interest in shorting this pair, as the interest rate differential will continue to reward those who are long of it.
Want to trade our USD/JPY forex analysis and predictions? Here's a list of forex brokers in Japan to check out.