The US dollar has rallied rather significantly during the course of the week to launch itself from the ¥115 level and finally break above the resistance barrier near the ¥116.33 region. That is an area where we had tested multiple times, and now that we are through that area is very likely that we will continue to see this pair grind much higher. Because of this, I think the market will continue to be a “buy on the dips” scenario, and therefore I think the market will eventually find its way much higher, but that does not necessarily mean that we go straight up in the air.
USD/JPY Video 14.03.22
For what it is worth, it is worth noting that the market is highly sensitive to the interest rate differential between the two countries, and therefore the Federal Reserve meeting this coming week will be crucial. All things being equal, this is a market that I think is going to continue to find plenty of value hunters, especially if the interest rate differential continues to favor the greenback. If the Federal Reserve sounds very hawkish, it is likely that the market will continue to go much higher. However, if the Federal Reserve suddenly sounds a bit dovish, then we could crash through the ¥115 level. That could be a significant breakdown.
The size of the candlestick is rather impressive, so it certainly means that a lot of people are interested in going long. I anticipate that this is a market that will continue to see a lot of volatility, but I believe that the breakout that happened late in the week tells you more than anything else can.
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This article was originally posted on FX Empire