Potential signal:
- I am a buyer of this pair above the crucial 148 level.
- I would have a stop at 147 and a target of 150.50 above.
During trading on Tuesday, we initially saw the US dollar drop against the Japanese yen to test the crucial 50 day EMA. That being said, we bounced quite nicely from there. And I think you’ve got a situation where the market continues to make a series of higher lows and higher highs, which is the definition of an uptrend.
This isn’t to say that this will be an easy move and it’s not to say that it will be a clean move, but I still prefer the upside. Ultimately, this is a market that I think you will have to pay close attention to the 148 yen level because it is an area that’s been important multiple times. And of course, now features the 200 day EMA.
On a Break Above Monday…
So, with that being said, if we can break above the inverted hammer from the Monday session, that’s my signal to start buying again. If we pull back from here, then we may just simply go back and forth for a while, which really wouldn’t be that surprising in this market as it tends to be very choppy. Regardless, the 146 yen level should be support as it had previously been both support and resistance, but that is something that we need to keep in the back of our mind, not necessarily in the forefront as right now, the biggest thing is whether or not we can break above the Monday session.
Remember, we get paid to hang on to this pair as the interest rate differential most certainly favors it. And I think you’ve got a situation where traders will continue to look at this as a market that if you’re patient enough, you get paid to hold onto it as we turn around. I do anticipate that there are a lot of questions about the Federal Reserve and whether or not they will be able to cut rates anytime soon. Right now, it doesn’t look like they are willing to go along with the Fed funds futures rate, which is what they’ve been doing all year. And if that’s going to be the case, and the Japanese are forever, a low-rate country, then it does make sense we rally.
Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.
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.