(MENAFN- Daily Forex)

• The US dollar continues to firm against the yen, with volatility masking an underlying upward bias.
• A wide rate differential and supportive U.S. outlook keep buyers in control, making dips attractive while major support remains intact.

The US dollar rallied a bit against the Japanese yen during the trading session on Tuesday, as we continue to see this market trying to recover. Ultimately, I think we are probably in a timeframe of noisy volatility, and that noisy volatility will continue to be the overall theme, I think not only of this pair, but probably several others.

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Looking back over the last several months, we have seen a lot of strength coming out of the US dollar, and sooner or later, there has to be a little bit of a pullback. And I think that's all we are seeing here. Yes, the Federal Reserve has an interest rate decision next Wednesday, and it very well could be an interest rate cut. But the reality is, the interest rate differential between these two currencies will remain wide enough to drive a truck through.

EURUSD Chart by TradingViewRate Differential Supports the Trend

And with that being the case, I just don't see why you would get short of this market unless we get some type of financial meltdown. That being said, the first quarter of 2026 should be very strong for the US economy, from some of the leading indicators that I follow. And therefore, I think the US dollar will continue to strengthen against most currencies. I don't necessarily think this is a scenario where it's going to be straight up in the air, but I do recognize that there's a very real world in which there is just a grind higher.

I think that ends up being the overall theme here, and with that, I remain a buyer of dips. I have no interest in shorting this market, nor would I even be concerned about the trend until we broke down below the 153 yen level, where the 50-day EMA and previous support and resistance show themselves.

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