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- The US dollar rallied significantly during the early hours on Tuesday in what has been insane trading, especially as we watch the 10-year yield really start to rip to the upside in America.
- That is going to have a major influence on how the US dollar trades.
Ultimately, I do think we break above the 158 yen level regardless, but with rising yields and the volatility that we are seeing in the bond market, this makes the dollar even stronger. Add to that the fact that the Bank of Japan, who might begin to normalize is probably looking at less than half a percent, you're still going to get paid to own this USD/JPY pair , and there's not a lot the Japanese can do about it. They basically need the Federal Reserve to step in and start cutting rates and then somehow convince the market to go along with it, which so far Jerome Powell hasn't been able to do. On a break above the 158.50 level, I think you could see the US dollar go racing toward the 162 yen level.
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Short-term pullbacks continue to offer buying opportunities, especially near the 157 yen level, and most certainly at the 155 yen level where I see previous action and the 50 day EMA racing toward it. I have no interest in shorting this pair. I do not wish to fight the trend and trying to pick the top is a game for losers. The market continues to see fundamental reasons for the US dollar to strengthen. And while it has had a very strong run against the Japanese yen, that doesn't mean that it can't continue. With non-farm payrolls on Friday, that could be the next catalyst, we don't know. But really, I'm just looking at a market that's consolidating, building up pressure to try to go to the upside yet again.
EURUSD Chart by TradingView
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