USD/JPY Forecast – US Dollar Bounces

USD/JPY Forecast Video for 05.06.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar rallied a bit during the trading session on Friday, as the Non-Farm Payroll announcement caused quite a bit of noise, making the market look very much like one that is trying to figure out where we are going next. Ultimately, I do think that this pair goes higher, and we are getting relatively close to a major support level in the form of the top of an ascending triangle that we had been involved with previously. By doing so, it looks like the market is starting to attract a certain amount of buying pressure, and of course the interest rate differential will continue to favor the Americans.

The Bank of Japan continues to see the need to keep interest rates rather low, and as a result I think we are going to continue to see the Japanese yen get beaten up. With the 50 basis point rate cap on the 10 year JGB, it means that the Japanese will be coming back into the market and flooding it with Japanese Yen as they buy those bonds. To do so, the market will more likely than not look like one that continues to attract a lot of “buy on the dip” type of situational traders. With this, I do think it’s probably only a matter of time before we get into the ¥140 level, perhaps even the ¥141 level.

Speaking of targets to the upside, based on the measured move of the triangle, the market could go all the way to the ¥148 level given enough time. I do think that we do eventually reach that level, but it does not necessarily mean that we need to get there overnight. Quite frankly, this is the type of situation where traders will probably continue to find value and take advantage of it, but if we were to break below the bottom of the 138 level, then we would face the 50-Day EMA underneath, which is closer to the ¥137 level. Ultimately, I think at this point in time it’s a matter of being patient and letting the market do its thing.

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