(MENAFN- Daily Forex)
The USD/JPY initially tried to rally during trading on Friday but then turned around the fall. Ultimately it looks like the 152 yen level is going to continue to be a major barrier that's difficult to break above and that might be part of what we are seeing here. Regardless, this is a market that is extraordinarily bullish and I just don't see that changing anytime soon due to the fact that the interest rate differential continues to favor the US quite drastically.
The Bank of Japan recently has raised rates as well, but it is still just one tenth of a percent in Japan as opposed to the much larger interest rate that you get paid to own the greenback. So, with that, I think you continue to buy dips and I do think that we eventually break out to the upside. At this point, the market doesn't believe that the Japanese will be able to raise rates again, and certainly not by much even if they did.
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If we break above the 152 yen level, then the market is likely to continue to go racing much higher. I think the 155 yen level is a very realistic target, but ultimately this is a situation that every time we have pulled back there have been plenty of buyers getting involved, and this is a structural bullish market. The 155 yen level is just yet another large round figure. It's not anything in particular that I think could stop the market. It's just a target. Underneath we have the 50-day EMA offering support near the 149 yen level. And then again, we have massive support at 146.50 yen. This USD/JPY market had gotten a little bit ahead of itself, so a short-term pullback does make a certain amount of sense. But we are through both the Bank of Japan interest rate decision and the Federal Reserve interest rate decision, and it looks like the market has made up its mind.
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