Furthermore, you should also keep in mind that the 50 Day EMA sits underneath the ¥155 level, and that of course in and of itself probably causes a little bit of technical support. With this being the case, the market is likely to continue to look at this as a “buy on the dips market”, for a whole plethora of reasons, not the least of which would be the way the market behaved during the last day or so. Ultimately, this is a market that still has a major interest rate differential, but there are some questions about things going forward.

Central Banks

Keep in mind that the central banks are very heavily influential in this pair, as the Federal Reserve seems likely to be higher for longer at this point, and therefore it does make a certain amount of sense that we would see the US dollar remains somewhat strong. That being said, the market is also paying close attention to the Bank of Japan, which may have to tighten monetary policy sometime this year, but the interest rate differential would still be huge between the Americans and the Japanese. With that being the case, I think we continue to go higher over the longer term, but the last couple of days were probably necessary to shake out some of the “weak hands.”

Short-term dips should continue to be buying opportunities, and I have no interest in shorting this pair anytime soon. While things could change down the road, right now it looks like the Federal Reserve is light years away from starting to cut rates.

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