The US dollar fell slightly during the session on Wednesday initially, but started to stable out as the Federal Reserve came back into focus. Longer-term, the Federal Reserve looks likely to stay on the sidelines a bit longer, as most traders do not expect an interest rate hike in the short term. If we do breakout to the upside, I think the market probably goes to the 114.50 level above which has been the top of recent consolidation. I believe the pullbacks will be buying opportunities, as although the Federal Reserve may have to wait a wild before raising interest rates and perhaps shrinking the balance sheet, and the end, they are going to do it much quicker than the Japanese central bank will. In fact, the Bank of Japan is likely to extend its quantitative easing.
Buying dips
I believe in buying dips, and I think that they may come relatively soon. However, I would be very careful about jumping into this market as shorting the Japanese yen should only be done when the markets are going higher in general. If we get a bit of a pullback, that could make this a bit of a mess. Also, I believe that buying other currencies against the Japanese yen makes much more sense. Some of the likely candidates would be the British pound, Canadian dollar, and even the Euro. In the meantime, I think that this pair tends to be one that will go back and forth quite a bit so buying those dips makes sense, but I would also be quick to take profits. I think that this will be a burst of trades back and forth, ultimately settling on an uptrend given enough time. If we were to drop below the 108 level, that would be massively negative for this market.
Written by FX Empire