USD/JPY Forecast – US Dollar Continues to Break Down Against the Japanese Yen

USD/JPY Forecast Video for 13.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has fallen significantly during the trading session on Wednesday, as we have broken down below the 50-Day EMA, and plunged deeper into what would be the previous bullish flag. All things being equal, this is a market that I think is going to find support sooner or later, because even with a cooler than anticipated CPI number on Wednesday, the reality is that the interest rate differential between the United States dollar and the Japanese yen is quite wide. In other words, you will get paid to hold onto this position, therefore I’m looking for some type of buying opportunity.

While the market has plunged rather significantly, the reality is that we were probably a bit overdone. Whether or not we can bounce remains to be seen, but if we were to recapture the 50-Day EMA, that is likely that the market could go looking to the ¥142.50 level, perhaps even to the ¥145 level. This is a market that is going to continue to pay close attention to the Bank of Japan, and the fact that they are going to continue to keep very loose monetary policy going forward.

Underneath, we have the ¥138 level, which was the top of an ascending triangle, and was an area where we had seen the light of previous resistance. Because of this, I would anticipate that there should be a significant amount of “market memory” coming into play, and therefore think you got a situation where the markets will try everything they can to support the dollar there.

It is worth noting that we have seen a little bit of a bounce later in the day against the CPI figure reaction, therefore if we were to continue this, it could be the final “flush lower” that we had seen. All things being equal, if we break down below the ¥138 level, that would obviously be very negative. A lot of this comes down to interest rates around the world, and if they do drop a bit, that does favor the Japanese yen as we continue to see dramatic actions around the world for the markets around.

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