- The USD/JPY currency pair rallied a bit Monday as the Japanese yen recovery has stalled.
- At this point, the ¥136 level is an area that a lot of people will pay attention to.
- If we were to break down below there, I think there are multiple areas that we could see buyers jump into.
Divergent Central Banks
The ¥135 level is a large, round, psychologically significiant figure, and therefore will attract quite a bit of attention. Below there, we then have the 50 Day EMA. In other words, there are a lot of different things underneath that could offer support, so I would keep that in mind. The trend has been well ensconced for a while, mainly due to the Federal Reserve entering a tightening cycle over the last several months, and therefore it makes sense that the US dollar would strengthen. Furthermore, the Bank of Japan continues to loosen monetary policy, so therefore it’s like a perfect set of divergent central banks.