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MENAFN- Daily Forex)
During trading on Thursday, we have seen the US dollar go back and forth against the Japanese yen as we try to sort out whether or not the ¥143 level will offer enough support to keep this market afloat. All things being equal, this is a market that is going to continue to be bearish from a longer-term perspective, looking back at the least 3 months or so.
As the tariff war continues, it's interesting to see that the Japanese yen has been used as a safety currency over the US dollar, as the US bond market has been sold off quite viciously. That being said, I think there is a part of the story that people are not cognizant of. Most traders look at the US dollar falling and simply assume that it is some type of political decision. Reality is that bonds are being sold off in the United States in order to raise cash. After all, one of the most common places to store cash for large corporations and sovereign wealth funds would be the US Treasury market, so if you found yourself in a situation where you may need to hoard cash and become much more liquid, you would sell your bonds.
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That being said, the end result is somewhat the same, but I think this is much more temporary than people realize. After all, the Federal Reserve looks likely to remain somewhat stubborn as far as interest rate cuts are concerned, and at the same time, you have the Japanese unlikely to do anything too aggressive. If global trade does in fact slow down, Japan is particularly vulnerable to this, and you may see the interest rate differential get interesting yet again. After all, you do get paid to hang on to this pair for the end of day swap.
At this point, I think if the market can close above the ¥145 level on a daily candlestick, then you may have more of a correction ahead. On the other hand, if we were to break down below the ¥142 level, then I think we would drop down to the ¥140 level.
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