The US dollar experienced an initial surge against the yen; however, it is important to highlight that the markets continue to incentivize holding the USD/JPY pair on the long side. The US dollar experienced a slight rally during Friday’s trading session; however, we have retraced some of those gains. It is not particularly surprising, nor do I believe it holds significant importance, as Friday tends to be a negligible day for trading; most traders are unlikely to engage until at least Monday.
Given the current phase of consolidation, the initial upward movement followed by a reversal within the same session is not unexpected for USD/JPY. The market is currently facing resistance at the 158 yen level, while the 155 yen mark serves as a support floor. The 50-day EMA is positioned prominently, yet I believe the support level is quite robust, suggesting that short-term declines are likely to present favorable opportunities.
If USD/JPY manages to surpass 158 yen, which I anticipate will occur in due course, the next target would be the 160 yen level. Should there be a decline beneath the 50-day EMA, the 153 yen level may be sought for support. Anticipating considerable volatility in the near term, I maintain a bullish outlook for USD/JPY in the long run.
This perspective is primarily driven by the Bank of Japan’s inability to implement significant monetary policy tightening. Consequently, holding USD/JPY on the long side continues to offer attractive carry returns at the conclusion of each trading session. While the interest rate differential may narrow somewhat, which could dampen momentum, the current outlook does not suggest a compelling reason to adopt a short position unless an unforeseen external shock significantly disrupts risk appetite.