It makes a certain amount of sense considering that we have the nonfarm payroll announcement coming out on Friday. That’s a major factor in the USD/JPY pair quite often because of the bond markets and the interest-rate moves that it will cause.
I still like the interest rate differential
That being said, I do prefer the interest rate differential, and I do prefer going long. If we can break above the ¥159 level, that would be a bullish sign. If we break down below the ¥156.50 level, that would be a bearish sign. Quite frankly, it’s a bit of a coin flip at this point because the next piece of information is something that we don’t know.
If it breaks down to the bottom, I probably won’t be selling it. I’ll be looking to buy it at a lower level. If it breaks out to the upside, there will be chatter out of Japan about intervening. But quite frankly, the interventions can only last so long. The reality is the market’s bigger than the central banks. It’s not like it used to be, so don’t get too hung up on that.
You position-size accordingly and just trade your market. I like the idea that I get paid at the end of every day, just like if I’m long dollars against the Swiss franc. This one’s a little different because of that BOJ intervention risk, but ultimately, the interest-rate differential is still wide enough that you can drive a truck through.
Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
