The US dollar rose against the Japanese yen at the beginning of the Asian session on Monday, but once the Europeans and the Americans came on board, it became very quiet. A lot of this may be since the financial sector is reporting earnings early this week, and stock market traders will be looking to find some type of clarity before throwing money into the US indices. Remember, the USD/JPY pair does tend to follow stock markets overall, and as a result it’s likely that the market will wait for cues from that stock market. I do believe that the overall trend is to the upside, and the 115 level is a target for the bullish traders out there, but it is also a massive resistance barrier. I think given enough time, we will break out above there, but it may take several attempts. That will make this in a sense a “buy on the dips” type of situation.
Buying the dips
At this point, the only thing that I can think of to do is to buy on the dips as the US dollar is continuing to gain strength as interest rates are a set to go higher from the Federal Reserve. On the other side of the coin, the Bank of Japan is likely to keep interest rates ultra-low for the longer term, so that sets this currency pair up for a long grind higher. Once we clear above this resistance barrier, the market could go much higher. I think that selling is all but impossible, and that the 113 level will now start to act as a bit of a floor in a market that’s ready to go much higher, and simply waiting for some type of momentum or catalyst. That may be found in the US stock markets.
Written by FX Empire