Baxia Markets
March 08, 2023

US Dollar continues to find buyers against the Japanese Yen

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USD continue its recovery against the Japanese yen

During Monday's trading session, the US dollar experienced a slight pullback but was able to turn things around and continue its recovery against the Japanese yen due to enough buyers being present to support it. This is a logical result as the Bank of Japan is currently defending the 50 basis point level on the 10-year note in their country. As a result, it's probable that the market will experience more upward movement than downward.


However, there is a significant amount of resistance located just above the ¥137.50 level. On the other hand, underneath, the ¥135 level is providing support, and it has seen a lot of previous activity. It was previously both support and resistance, which suggests that there should be a lot of "market memory" in that general area.


Moreover, the 50-Day EMA is attempting to cross back above the 200-Day EMA to form the "golden cross." This is a significant indicator that many longer-term "buy-and-hold" traders will pay close attention to. As a result, traders are likely to have many reasons to keep pushing the market higher. If the market can break above the ¥137.50 level, then it is possible to go all the way up to the ¥150 level.


USD/JPY trading pattern can be repeated 

Another factor to consider closely is that we recently formed a "double bottom" near the ¥127.50 level. This was the 50% Fibonacci level from the massive move higher that we saw last year. Given that the central bank situation has not changed, it's likely that we will revert to last year's trading pattern. However, this may not happen as quickly as anticipated. It's also worth noting that the interest rate market in America continues to show higher yields. As a result, the so-called "carry trade" makes a lot of sense in this particular case. This isn't only visible against the US dollar, but also against many other currencies around the world. This is because the Bank of Japan is the only major central bank in the world that is utilizing quantitative easing monetary policies, so the interest rate differential will continue to favor other currencies.

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