The US dollar has rallied slightly in the early part of the trading session on Wednesday, as we continue to see the USD jump against the Japanese yen. The question now is whether or not the Bank of Japan is going to intervene, as we are getting close to those levels they defended previously. This is essentially a swing high that dates back to the 1990 trading year, when we started seeing the dollar really fall.

30+ Year Rounding Bottom

We have formed a massive rounding bottom that goes back to that time period. At this juncture, if we were to break out to the upside, you could be talking about a move all the way back to the 225 yen level. That, for me, would be an ultra-long-term prediction, assuming that it even could come true. However, in the short term, I would anticipate that there will probably be a lot of questions asked about this general vicinity. This is an area that could determine what happens for the next several years if history tells us anything.

Most of the time, central bank intervention only temporarily slows down what the market wants. If we do pull back from here, the 160 yen level should be an area that could offer support; after that, we would look at the 50-day EMA, which is presiding right around the 159 yen level. If the Bank of Japan does choose to intervene, I think that’s great—it means a day or two later, I can start buying the dollar again and collecting swap (the interest rate differential) at the end of each trading session. I really don’t see how this pair doesn’t break out eventually. It might be noisy and choppy, but don’t sleep on this market.

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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

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