In general, this is a situation where the market continues to be one that people will be buying on dips, as the markets will continue to see the interest-rate differential drive this market much higher. The downside is protected by the 50-Day EMA, which has acted almost like a trendline. With this being the case, I think if we were to break down below there, we may see a little bit of a move lower, perhaps down to the ¥147.80 level.
All things being equal, I do think that you are just seeing a market that is trying to focus on the Bank of Japan, the fact that they have no interest whatsoever in trying to raise interest rates. All things being equal, the markets are going to continue to focus on the fact they get paid at the end of the day by holding this pair, and a lot of investors have been long of this market for some time.
The markets will continue to see plenty of interest underneath as the interest-rate policy in Tokyo is hampered by the fact that Japan is one of the most indebted nations on the planet. As interest rates rise, that will make debt a major problem in Japan, so despite the fact that the Bank of Japan will occasionally jawbone the markets, it doesn’t necessarily mean that they will actually ever do anything. A lot of this comes down to the Federal Reserve and whether or not interest rates in America continue to climb. At this point, it looks like they will stay elevated and therefore favor the US dollar.
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