US Dollar Attempts to Recover Against Japanese Yen

USD/JPY Forecast Video for 05.04.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the trading session on Tuesday to reach towards the 50-Day EMA. Above there, the 200-Day EMA comes into the picture as well, and therefore it’s likely that we will see a little bit of hesitation. However, if we can break above the 200-Day EMA, the market more likely than not will go looking to reach the ¥135 level. Ultimately, this is a market that continues to see a lot of noisy behavior, therefore it’s likely that we would see volatility more than anything else.

Keep in mind that the Bank of Japan continues to stick along the lines of a yield curve control program, with an eye on the 50 basis point level on the 10 year JGB. As long as this correlation continues, it’s very likely that we will see the Japanese yen gain and lose right along with the interest rates. As interest rates rise, it’s likely that we would see the Bank of Japan start printing yen, thereby flooding the market with supply. This is exactly what happened to the Japanese yen last year, as they had to do a lot of printing to buy the bonds in order to keep the interest rate down.

On the other hand, if interest rates around the world continue to fall, that will make this pair fall as it puts a lot less pressure on the Japanese yen. Furthermore, it’s a bit of a safety play, as traders look for bonds, it drives the rate down, and therefore it’s a bit of a feedback loop. It’s worth noting that this pair is trying to form some type of massive bearish flag, so if we do break down below the ¥130 level, then it’s likely that we would break down rather drastically.

On the other hand, if we break above the ¥135 level, that kicks off a continuation pattern after trying to bottom. In that situation, it’s likely that we could start reaching towards the highs again over the longer term. It’s all about the bond markets, and therefore it’s worth noting that the majority of the moves that we have seen recently have been in congruence with the 2 markets.

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