Technical Analysis US Dollar vs Japanese Yen
The US dollar initially rose in the early hours of Tuesday but then reversed and fell again. The 142 yen level below that is a key support level and I think it’s worth noting at this point that we also have the intersection of an upward trend line that a lot of people are paying attention to. I think we’re in the middle of trying to form some sort of double bottom at the moment. At this point, the double bottom is obviously a sign that things are maybe starting to turn around. Of course, we recognize that the Federal Reserve is likely to cut rates later this month.
But the question is how much do they cut? If they cut just this month and maybe again, the interest rate differential between the US dollar and the Japanese yen will remain pretty much intact. Yes, it is smaller, but it is still enough to attract a certain amount of inflow. If we can reverse and break above the 145 yen pair, maybe even reach the 149 yen level.
Also, we have to keep in mind that both the CPI and PPI are coming out later this week, so that will have a bit of an impact. And then we also have to keep a risk appetite in mind. If we were to close below the 141 yen level on a daily close, I think the bottom will fall out and we will probably go down quite a bit.
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This article was originally posted on FX Empire
