USD/JPY Forecast – US Dollar Continues to Find Buyers on Dips

USD/JPY Forecast Video for 07.04.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially dipped a bit during the trading session on Thursday, as we continue to see a lot of movement based upon bonds. Remember, the Bank of Japan continues to practice yield curve control, keeping an eye on the 10 year JGB. The maximum amount of interest rates coming out of that country is going to be 50 basis points, but in order to do that the Bank of Japan will have to print more yen to buy more bonds and keep those interest rates down. Because of this, the market has moved in lockstep with what the bond markets are doing.

As rates rise, the US dollar has rallied. However, as rates drop, you see the Japanese yen rally. The ¥130.50 level down to the ¥130 level has been significant support as of late, so it does make a certain amount of sense that we would continue to see an attempt to stabilize and hold onto that area. The fact that we ended up forming a hammer during the Wednesday session was a good sign, and the Thursday candlestick looks very similar.

That being said, keep in mind that Friday is Good Friday, and of course Monday is a holiday for most European banks. In other words, liquidity could be a bit of an issue over the next couple of sessions, but ultimately, I do think that we are trying to form some type of base. If we do not manage to drop from here, then it’s possible that we may start to see a bit of a recovery from the greenback. When you look around the Forex world, you can make an argument that the US dollar is a bit oversold at the moment. On the upside, I would anticipate that the 50-Day EMA could be your initial target.

Underneath, the ¥127.50 level was an area that had seen a significant amount of support in the past, so it could very well end up being a situation where we continue to try to hang onto it, offering the possibility of a floor in the market. If we break down below there, then it’s very likely that the market gets hammered.

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