The U.S. dollar continues to see a lot of noise at the moment, as we are looking at the reaction to interest rates playing out, as the employment numbers were much stronger than expected.
USD/JPY
The U.S. dollar initially pulled back a bit during the Friday session but then turned around to show signs of life. Ultimately, this is a market that is range-bound, as we have been seeing a lot of sideways action from the middle of September to now. The 200-day EMA is flat, with the 50-day EMA sitting just above it, just as flat.
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Interest rate differentials
The interest rate differential is something worth watching. That being said, the interest rate differential is something worth watching, as you get paid to hang on to this pair to the upside. I think that is a lot of what was reinforced today, as the United States added 165,000 jobs last month.
Meanwhile, the Bank of Japan, which does have a meeting here fairly soon, may or may not hike rates. The latest one reiterated a 1.25% overnight rate. The Americans almost certainly will have to in December. I think that has got to be close to 100% certainty at this point. Before the announcement, it was something like 75%. This market will almost certainly be expecting the interest rate differential to widen, not shrink.
With this being the case, I like buying dips. I do think that eventually, if we can break above the ¥159 level, that is your signal to start getting long from a longer-term standpoint.
For myself, I am building a position on dips. As long as we can stay above the crucial ¥156.50 level, I think this is a market that continues to see plenty of support underneath that people are willing to express. This is a market that I am only buying and not worrying about selling at this point in time.
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