- The US dollar rallied significantly in the early hours of Tuesday in what was a frenzy of trading, especially as we watch the 10-year yield really start to move higher in America.
- This will have a major impact on how the US dollar is traded.
Ultimately, I think we broke above the ¥158 level regardless, but with rising yields and the volatility we’re seeing in the bond market, that makes the dollar even stronger. Add to that the fact that the Bank of Japan, which may start to normalize, is probably looking at less than half a percent, and you’ll still get paid to own this USD/JPY pair, and there’s not much the Japanese can do about it. They basically need the Federal Reserve to step in and start cutting interest rates and then somehow convince the market to go along with it, which Jerome Powell has so far been unable to do. On a break above the 158.50 level, I think you could have seen the US dollar rushing towards the 162 yen level.
Retreats offer opportunity
Short-term pullbacks continue to offer buying opportunities, especially near the 157 yen level, and most certainly at the 155 yen level where I see the previous action and the 50-day EMA running towards it. I’m not interested in shortening this pair. I don’t want to fight the trend and trying to fight the top is a losing game. The market continues to see fundamental reasons for the strengthening of the US dollar. And while it had a very strong triumph against the Japanese yen, that doesn’t mean it can’t continue. With non-farm payrolls on Friday, that could be the next catalyst, we don’t know. But really, I’m just looking at the market consolidating, creating pressure to try to move higher again.
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