Potential Signal:
- The potential signal that I see here is that if we get a daily close above the ¥155 level, I would be a buyer again, with a stop loss near the ¥154 level.
- If we can break above the ¥157 level, then the market would probably go looking to the ¥158 level, which is even more resistant.
The Monday session has been wild, as the DeepSeek drama unfolds. This has technology stocks getting absently hammered, as the Chinese AI has been released via open source and supposedly will wipe out all other AI LLMs. However, this is quite a bit of nonsense, because we just don’t know how things play out, and this of course has nothing to do with Japan or the Japanese yen itself. What this has been during the day has been a run toward safety, which always has people looking to the Japanese yen to begin with.
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Technical Analysis
The technical analysis for this USD/JPY pair is strong over the longer term, but at this point in time the market has seen quite a bit of damage during the Monday session. That being said though, the market were to recapture the ¥155 level, it would be above the 50 Day EMA, which is a very bullish sign. At this juncture, the market could very well see the ¥157 level as a bit of a barrier, but if we break above there it’s likely that the market could go looking to the ¥158 level.
In general, this is a market that I think is starting to show signs of life again, as the market has bounced a bit from the bottom. However, I will wait until we get above the ¥155 level, on a daily close. Ultimately, this is a situation where the market will continue to see a lot of questions asked about risk appetite, but at the end of the day, the US dollar will continue to be one of the stronger currencies that you can hold. The interest rate differential between the 2 currencies will continue to favor the greenback, so I don’t have any interest in trying to short this market regardless. That doesn’t isolate mean that you should always be long of this market, just that it’s a one way trade at the moment.
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