The US dollar has initially pulled back during the week but has turned around to show signs of life again as the ¥114.50 level seems to have offered relative support. Looking at this chart, you can see that we have been in an uptrend for quite some time, and it certainly makes sense that we would see buyers continue to run into this market. Ultimately, the ¥114 level seems to be supportive as well, just as the ¥116.33 region offers resistance. In fact, that is an area where you can see on the daily chart that there is a bit of a double top.
USD/JPY Video 28.02.22
Looking at this chart, I think it continues to offer a bit of a “buy the dip” type of mentality, as the US dollar offers a stronger interest rate than the Japanese yen does, and that continues to be the main driver overall. After all, the market is favoring the carry trade in general these days, and that of course has a certain amount of favor for the greenback against the Japanese yen as the Bank of Japan is nowhere near tightening monetary policy while the market has roughly 6 interest rate hikes priced into the markets. As long as that is going to be the case, then the US dollar should outperform the Japanese yen over the longer term.
The two things that could change that is if the Federal Reserve suddenly changes its attitude and talking points, or war starts to spread throughout Europe. As it looks like the Western powers are not interested in a ground war, it is likely that this pair will continue to rally in general.
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This article was originally posted on FX Empire
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