- The US dollar has rallied a bit during the early part of the trading session on Thursday as we continue to see the Japanese yen soften.
- That being said, the market is comfortably above the 200-day EMA and that obviously is a bullish sign. I do believe we’re in the midst of trying to form a W pattern.
If we can break above the 50-day EMA, the 158-yen level could be the next target. When you look at the longer-term charts, it’s important to pay close attention to the 160-yen region because it is a swing high that has been defended all the way back to the 1990 era.
Interest Rate Differentials and Policy Impact
With this I like the short-term pullbacks as a potential buying opportunity with the 152-yen level being a bit of a hard floor. If we were to break down below there it could change a lot of things but right now when you look at this it’s hard not to recognize that the market will continue to look at the interest rate differential and the lack of the Bank of Japan’s ability to truly tighten monetary policy as a reason to go higher.
Furthermore, the massive, short interest in the United States dollar continues to be a potential catalyst for a recovery as it has been overdone. On Friday we get the US core PCE price index number and that will have a major impact on this pair if it is out of bounds.
It’s forecasted to be 0.2% month-over-month. If it’s higher than that it may add more credence to the higher for longer narrative that we see with the US dollar.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
