• The US dollar against the Japanese yen the US dollar has a rallied a bit after initially dropping against the Japanese yen on Tuesday.
• This is interesting because the momentum has shifted quite drastically.
• People really wanted to buy the dollar as we saw the US dollar strengthen against multiple currencies such as the New Zealand dollar, the Australian dollar, and the Japanese yen.

So maybe it’s a move away from the Pacific at the moment. The 145 yen level above will end up being resistance from what I can see. And if we can break above there, then that would be a very bullish sign. Keep in mind that we have the 50 day EMA just above that area and dropping. So, I think you’ve got a situation where there is a lot of potential selling pressure there.

The Technical Picture

If we can clear the 50 day EMA, that could open up the dollar for a much bigger move against the Japanese yen. Keep in mind, the interest rate differential still favors the US dollar massively and the oversold condition of course does as well. In other words, this looks a lot like a rebound play like I have been talking about recently with the double bottom at 140 yen.

If we break down below the 142 yen level, then we will revisit that crucial 140 yen level. I think ultimately, we’ve got a situation where when you look at the longer term charts, 140 yen is just massive in its implications. And now we’re trying to turn things around. Breaking above the 145 yen level opens up the possibility of 148 yen and then eventually 150 yen. I do think this is going to be very noisy, but we are getting to a point where the Bank of Japan is going to have to step in and buy Japanese bonds. In other words, quantitative easing. Quantitative easing is typically poor for the currency.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.