On the upside, if we were to break above the ¥132 level, or perhaps more specifically the candle from last Wednesday after the Bank of Japan decided to reiterate its desire for yield curve control, then I think the US dollar starts to take off against the yen.
- The USD/JPY has gone back and forth during the trading session on Thursday as we continue to hang around the ¥130 level.
- This is an area that’s been important multiple times, so I think it does make a certain amount of sense that we would see this as a situation where we’re trying to figure out where we are going for the bigger move.
- After all, we have recently heard the Bank of Japan tell us that it is going to stick with the 50-basis point ceiling in the 10-year note, and therefore it’s likely that we will continue to see the markets move based upon what’s going on in the bond market.
The yen is a popular asset during turbulent times.
If we see yields rise worldwide, the theory of course is that the Bank of Japan will have to print yen to buy a ton of bonds. That’s essentially what caused the major melt-up as we saw this last year and is still a very real possibility at this point. A lot of psychology is attached to it, but at the end of the day, we also must pay close attention to the ¥127 level underneath, which is a major swing point. Breaking down below that level opens a huge “air pocket” that we would then have to deal with. The market would then be in a freefall, therefore that will have me getting aggressively short again.
We are at a Major Crossroads at this Point
However, we also have the 50-Day EMA breaking down below the 200-Day EMA, which of course is a very negative longer-term indicator. Whether or not I would follow that remains to be seen, but I know a lot of systematic traders will.
On the upside, if we were to break above the ¥132 level, or perhaps more specifically the candle from last Wednesday after the Bank of Japan decided to reiterate its desire for yield curve control, then I think the US dollar starts to take off against the yen. In other words, I believe we are at a major crossroads at this point, therefore think we’ve got a situation where the market is about to make a huge decision rather soon, and therefore you need to be cognizant of any impulsive move that happens as a potential bigger trading opportunity going forward.