USD/JPY Stabilizes Around 200-Day EMA Amid Interest Rate Differential Favor

The USD/JPY pair has stabilized around the 200-day EMA after forming a hammer during Monday's session, indicating potential buying pressure.

Christopher Lewis, a technical analyst at DailyForex, notes that despite recent weakness, interest rate differentials still favor the US dollar, with rates over 3.5% against Japan's 0-1.25%. This means traders are essentially paid to hold long positions in USD/JPY.

Lewis believes that concerns about carry trade risks and potential market chaos will continue to be pushed back by markets.

From a technical standpoint, Lewis identifies key support levels at around 154, below which the trend would be considered broken. However, he remains long-term bullish on USD/JPY due to Japan's economic outlook.