The US dollar dropped slightly on Wednesday, as we continue to dance around the 200 Day EMA
USD/JPY
The US dollar has pulled back ever so slightly against the Japanese yen and some other currencies as well, as the interest rates initially fell during the trading session. But as we roll into the afternoon in New York, we are starting to see those rates pick up just a touch. That should provide a little bit of strength for the dollar, and we are seeing a return to that strength in this pair as well, just a touch. We are hanging on to a trend line that goes all the way back to the lows at the end of March.
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The question now is, will the Federal Reserve, the US Treasury Department, the Bank of Japan, everybody else continue to squash this pair, or will it change things? There are a lot of pundits out there who think mixed thoughts. One particular bank that I'm thinking of right now suggested that 2 billion dollars wasn't enough to change the trend. I tend to agree with that.
200-Day EMA and Key Technical Support
That being said, we are in an area, the 200-day EMA, that will capture a lot of attention. I suspect this is going to be more of the same. It's just a shot across the bow trying to slow down the hot money, while the longer-term investors watching a gradual climb aren't so much the concern. It's not necessarily the value of the yen that is the biggest problem; it is the rate of decay. It's all about the second derivative, if you will.
Ultimately, I'm still in a position in this market. I have again added a small position on top of when I got involved back in the middle of September. This pays me at the end of every day, and it pays me triple swap on Wednesdays, so that could be something to watch on the way out the door.
Pay attention to the 158-yen level. If that gets broken to the upside, that could signal more buying as well. As far as selling is concerned, or getting out of a position, if we broke down below the hammer, I might do that and then focus maybe more on the dollar against the Swiss franc. But as things stand right now, I think we're going to see some sideways action and then an eventual climb. That's what's happened the previous 3 times we've seen intervention, and of course, history does tend to repeat itself.
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