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

USD/JPY Forecast Video for 23.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially pulled back just a bit during the trading session on Monday, as we continue to see a lot of noisy behavior. By doing so, the market then turned around to show signs of life, forming a bit of a hammer by midday. If we can break above the high from the Friday session, then we could go reaching much higher, perhaps to the ¥140 level rather quickly. After that, then it’s possible that we could go to the ¥142.50 level. At this point, it’s obvious that the ¥138 level is rather important, which does make a certain amount of sense, as it was previous resistance for the massive triangle that we had formed before.

Either way, there is a huge ascending triangle that we just broke out of, and that in and of itself does have a lot of people interested in buying. For some time now, the Bank of Japan has been doubling down on its yield curve control policy, and therefore it’s likely that the Japanese yen will continue to suffer. After all, if the Bank of Japan has to continue printing yen in order to buy bonds, then it obviously floods the market with that currency as far as supply is concerned. On the other side of the equation, you have the Federal Reserve which remains very tight with its monetary policy, even though they may not necessarily continue to raise rates, they are almost certainly going to stay tight for quite some time. In other words, the “carry trade” is starting to offer itself again, as you get paid daily to hold this pair on the long side.

If we do pull back from here, the 50-Day EMA is sitting right around the ¥135 level, and therefore I think it would be a bit of a short-term floor in the market. Regardless, I just don’t have any interest whatsoever in shorting this market, and I do think that there will be plenty of people willing to get involved every time a little bit of value is offered in this pair.

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