• The U.S. dollar slipped against the yen on Tuesday, testing support near ¥153 after an early rally faded.
• Despite short-term softness, the broader uptrend remains intact as rate differentials continue to favor the dollar.

You can see that the U.S. dollar initially tried to rally against the Japanese yen during trading on Tuesday, but it is struggling. We did fall enough to go looking to the ¥153 level. The ¥153 level is an area that had been a significant resistance barrier and now could end up being a significant support level based on market memory.

If we do in fact see a little bit of a bounce, then it’s likely that the overall uptrend continues, and that does make a certain amount of sense considering that the interest rate differential continues to favor the greenback. The Bank of Japan will more likely than not have to stay somewhat loose with monetary policy, and the Federal Reserve has recently stated at the FOMC press conference that they are not ready to cut rates automatically, at least in December. So, we’ll just have to wait and see how this plays out.
 

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This is a market that won’t go straight up in the air forever, but I do think it goes higher over the longer term. A little bit of a drop and then a bounce opens up the possibility of value hunters coming in and picking up the U.S. dollar, jumping into this overall trend. If we break down below the ¥153 level, then the ¥152 level becomes support as well.
 

I Won’t Short Here

I have no interest in shorting this pair. The Japanese yen itself is weak against most currencies, and I think the U.S. dollar won’t be any different. All things being equal, I do think that we are going higher. We will probably go looking to the ¥155 level next, but it is going to be choppy and positive overall as the market has been more or less a grind to the upside. Ultimately, this is a market that I think is going to continue to look for value on dips and take advantage of them.

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