Potential Signal:
- I bought it here.
- Stop loss just below 153.
- Take half profit at 155. Let the rest ride.
The US dollar bounced sharply from 153.50 against the yen on Friday, maintaining its broader bullish trend. Strong interest rate differentials keep carry-trade demand intact, with upside favored unless price breaks below the 50-day EMA.
The US dollar has gone back and forth against the Japanese yen during the trading session on Friday, as we continue to see a lot of volatility in multiple markets. The US dollar initially fell pretty significantly to reach the 153.50 area, only to turn around and bounce again. This looks like a market that's ready to turn around and make things happen to the upside. And if we can get above the 155 yen level, then we could go much higher.
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Bullish Move on Friday
All things being equal, this is a very bullish sign, and this is a very bullish market. And I think we have a situation where short-term pullbacks continue to get bought into, which is exactly how I have traded this pair for months now. The interest rate differential between the two economies is obviously fairly large. And therefore, I think you've got a situation where you just simply get paid to hang on to a long position, which is exactly how I've treated this market.
It eventually rises, and you get nominal gains as well. But really, at the end of the day, as long as your position size is reasonable, you can collect the interest rate differential, the swap at the end of the day, known as the old carry trade. This is a situation where I don’t think I really have a situation where I would be shorting this market, but if we were to break down below the 50-day EMA, which is presently at the 151.43 level, then things might need to be looked at again.
But ultimately, I do think that the US dollar will eventually go looking to the 159 yen level. Ultimately, this is a market that I like. I think short-term pullbacks offer value, and I will take advantage of them as they occur, as not only is it rising, but I also get paid to get long of this market.
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