• During the early hours on Tuesday, we have seen the US dollar rallied against the Japanese yen, only to give those gains back up and fall flat.
• Ultimately, this is a market that continues to consolidate overall, and I do think that there are a lot of questions asked about where we go next.
• After all, the United States just narrowly avoided placing tariffs on multiple countries, as the new Trump administration has been quite busy.

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At the same time, the interest rate situation in both countries has narrowed a little bit, and that does take away some of the so-called “carry trade” that a lot of traders like this USD/JPY pair for. However, I also recognize that the Bank of Japan is somewhat lost as far as what it can do, while the Federal Reserve is probably going to have to stay somewhat neutral at the moment, meaning that they will have to stay with higher interest rates. Ultimately, this does drive this pair higher, but that doesn’t mean it does so in a straight line.

Technical Analysis

The technical analysis for this pair is rather bullish and I do think that despite the fact that the last couple of weeks have been somewhat flat, we still have to look at this through the prism of US dollar demand. Regardless of what you have been told, the US dollar is not going to suddenly cease being the world’s reserve currency. In fact, demand for US dollars has been picking up for some time, and ultimately this is a major factor in where we are going. Countries around the world continue to issue debt, and that debt is almost always done in US dollars. In other words, it’s a game of “musical chairs” that people will have to be cognizant of.

With all of that being said, I am bullish about this pair, but I realize we would probably need to break above the ¥156 level to get any real momentum into the market. As things stand right now, I think we are just simply crashing about and looking for some type of reason to do something.

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