USD/JPY Forecast – US Dollar Bounces

USD/JPY Forecast Video for 01.09.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially fallen during the trading session on Thursday, by the PCE numbers coming out as anticipated now has people looking forward to the jobs number. In other words, not much changed as a result of this, and therefore I think you got a situation where market participants will continue to look to the upside, but that doesn’t necessarily mean that it is a straight line higher. The ¥145 level is obviously an area that could offer support underneath, but after that we could also look at the 50-Day EMA which sits right around the ¥143 level. For me, the absolute “floor in the market” is that the ¥142.50 level. Anything above there still looks to me as a positive market.

If we can rally from here, and take out the high from the Tuesday session, then I do think that the US dollar goes much higher against the Japanese yen, which is something that I think happens given enough time. It doesn’t necessarily mean that it’s an easy way to go, but it is the most likely of past that this pair will take.

Keep in mind that interest-rate differential will continue to be a major driver of this pair, as the Federal Reserve remains very tight, and perhaps more importantly, the Bank of Japan continues to see the need to keep the interest rates low in that economy, therefore doing a hugely damaging impact on the currency. With this, I think you get a situation where the Japanese yen is probably the bigger driver of what’s going on here, and therefore I think you’ve got to look at this through the prism of whether or not the Japanese change their attitude.

Because quite frankly, even if the Federal Reserve loosens a bit, the reality is that the interest-rate differential will favor the US dollar for quite some time. I think ultimately, the market eventually goes looking to the ¥150 level, opening up the possibility of a target over the next quarter or so. Expect a lot of volatility, but I am still a buyer of dips but I also recognize that the jobs number on Friday could cause a lot of noise.

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