USD/JPY Forecast – The US Dollar Pulls Back Against Yen on Independence Day

USD/JPY Forecast Video for 05.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has pulled back just a bit during the trading session on Tuesday, as liquidity may have been a bit of an issue during about half of the session due to Independence Day celebrations. Ultimately, the market has been a bit overstretched, so I think at this point it’s very likely that we continue to see a correction. The correction in this pair is actually a good thing, as it should offer value given enough time. I’m especially interested in the ¥142.50 level, as it was an area of previous resistance. There should be a certain amount of “market memory” in that overall region, so I think it makes sense that traders would try to jump back into the market there.

Keep in mind that there is a bullish flag underneath that suggests that we could go as high as the ¥148 level. Furthermore, the ascending triangle underneath there also offers a significant amount of bullish pressure as far as the measurement is concerned, reaching a little closer to the ¥149 level. In other words, it looks like we are going higher, but some people out there are worried that the Bank of Japan might intervene. Quite frankly, this is a situation where the market continues to see a lot of bullish pressure over the longer-term but has gotten too far ahead of itself. I think you are probably better off waiting for some type of pullback to offer value, as the market had gotten so far ahead of its own.

That being said, the market continues to see plenty of reasons to go higher, but I think at this point you need to find enough value to get involved. The 50-Day EMA is now sitting at the top of the bullish flag, so I think that means that flag will probably offer support in and of itself as well. I have no interest in shorting this pair, rather I would prefer to see a couple of days that are quite ugly, that I can take advantage of. With the Bank of Japan keeping its monetary policy so loose, and of course the Federal Reserve staying tight, this is one-way trade.

For a look at all of today’s economic events, check out our economic calendar.