USD/JPY Forecast – US Dollar Continues to Find Buyers

USD/JPY Forecast Video for 26.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially fell during the trading session on Thursday but turned around to show signs of strength almost immediately. Because of this, the market continues to see a lot of momentum to the upside, and it now looks as if we are going to continue to go much higher. In fact, we are threatening the ¥140 level as I write this article, and it’s likely that we will continue to see even more upward pressure as the interest rate differential continues to separate these currencies.

Underneath, the ¥138 level is an area that previously had been resistant, as it was the top of a huge ascending triangle. In fact, now that we have broken out of that triangle the measured move is that they run all the way to the ¥148 level, which obviously would take some time to get to. Nonetheless, this is a market that I think will eventually have some type of impulsive move to the upside but will also have the occasional pullback that traders will look to take advantage of it as it will offer value. With this, it’s likely that we will see a lot of volatility, but I still believe that we will be going higher for quite some time due to the fact that the fundamentals do not support any other type of action.

The Bank of Japan continues to practice yield curve control, as they are keeping rates at 50 basis points or lower for the 10 year JGB. In order to do so, they have to print Japanese yen in order to buy those bonds. As long as that’s the case, the market will be flooded with currency and therefore it makes perfect sense that we continue to see a rotten higher against the yen. Furthermore, with the Federal Reserve being as tight as it is in the Bank of Japan being as loose, we now have the perfect set up for the classic “carry trade” to play out in this pair, something that it has done multiple times in the past and it looks like it is setting up to do currently.

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