USDJPY Price Analysis – Rates Continue to Offer Carry

From Daily Forex, this is Christopher Lewis taking a look at the US dollar against the Japanese yen. The US dollar has been all over the place against the Japanese yen during the early part of the trading session on Monday as traders get back to work after the weekend which saw President Donald Trump refuse the Iranian peace offer. And of course played havoc with the bond markets. Speaking of the bond markets, interest rates in America do continue to climb. And that is a major driver of the US dollar in general. The Bank of Japan has been threatening intervention again, but quite frankly they can only do it so many times before the market completely ignores them. And we are seeing the market test that whole theory. The 200-day EMA sits right here as well and that in and of itself could be a major uh driver of what happens next. If the market were to break well above the 158 yen level, then it's possible that the market could go looking to the 160 yen level, but that may take some time. A short-term pullback at this point in time opens up the possibility of a drop down to the 155 yen level. That's an area that has been important as well and as a result the market may see a little bit of support there if we do drop, but right now I still like the whole idea of the carry trade. I do recognize that we have not made a higher swing high quite yet. But it's also worth noting that the market has been manipulated by central banks. This isn't natural free-flowing uh transactions going on. The interest rate differential between the United States and Japan is still wide enough to drive a truck through and as a result we will continue to see a certain amount of interest to the upside here.