The US dollar experienced a slight retreat in Wednesday’s trading session as it encountered resistance at the 200-Day EMA. This market is characterized by turbulent behavior, attributed to the struggle of determining which central bank to follow. While the United States central bank has indicated potential rate cuts in 2024, the Bank of Japan failed to normalize rates this week. Consequently, two loose monetary policies are competing, leading to a sense of hesitancy when evaluating both currencies.
Resistance and Interest Rate Differential
The key point of attention is the 200-Day EMA, which garners significant focus. Notably, during Tuesday’s session, the market reached the ¥145 level. If the ¥145 level is convincingly broken, it is probable that the market will target the ¥147.33 level, where the 50-Day EMA sits. On the other hand, substantial support lies near the ¥142 level, a region that has previously exhibited a bounce. Additionally, an uptrend line can be observed in close proximity to this level. Currently, the market seems to be consolidating within this range, awaiting a surge of momentum.
Liquidity and Holiday Season
Considering that Christmas falls on Monday, the lack of liquidity will persist as a major concern. This factor adds to the likelihood of the market engaging in short-term, choppy trading. However, if the ¥145 level is breached, or conversely, the ¥142 level is broken, there is potential for the market to embark on another upward or downward move.
The US dollar encounters resistance as it battles against the loose monetary policies of competing central banks. The 200-Day EMA assumes a critical role, while the interest rate differential favors the US dollar. Nevertheless, market participants approach both currencies cautiously. The market is currently squeezed within a range and awaits a catalyst for momentum. Moreover, the impending Christmas holiday amplifies concerns regarding liquidity. As a result, the market is likely to engage in short-term, choppy trading until further developments unfold.