- The US dollar has gone back and forth against the Japanese yen during trading on Tuesday, as we continue to hover around the crucial ¥149 level.
- This is a level that I think will continue to be very important, especially as we head into the Wednesday session, because it is FOMC day in the United States, as the Federal Reserve will release its latest interest rate announcement and the accompanying statement, along with the press conference.
Technical Analysis
Ultimately, I think this is a market that is trying to build up enough pressure to break to the upside, but I also recognize that it is a market that faces quite a few headwinds. Wednesday will be extraordinarily noisy, right along with Thursday, as we have the Federal Reserve announcement on Wednesday, followed by the Bank of Japan sometime early on Thursday. In other words, this will be a very volatile pair over the next couple of days, so you have to be cautious. However, over the longer term, unless something changes quite drastically, I just don’t see why I would want to short this market as long as we are above the ¥146 level.
Keep in mind that the 50 Day EMA is sitting right around the ¥146 level, so I think that adds even more credence to that idea of a floor being put in the market. Anything below could open up a significant drop lower, perhaps sending the US dollar plunging quite drastically. This will almost certainly have something to do with the Bank of Japan itself, so I’d be paying close attention to that happening if it were to occur after the Bank of Japan meeting.
On a move above the ¥149 level, then I think the US dollar goes looking to the ¥151 level, which is an area that was a swing homemade previously. All things being equal, this is a market that I think you need to be very cautious with, but I also recognize that we are setting up for a bigger move sooner or later, so with that being the case, the market is likely to continue to be volatile, but I do think that we get a longer-term move in the next couple of sessions.
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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.