The U.S. dollar has rallied a bit during the trading session here on Thursday to slice through the 200-day EMA and the 50-day EMA indicators, but we've given that back.
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.
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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.
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