USD/JPY Forecast – US Dollar Continues to Find Tentative Support

USD/JPY Forecast Video for 31.01.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially fallen against the Japanese yen during early trading on Monday, but then turned around to regain the ¥130 level rather quickly. This is a market that continues to see a lot of back and for the right around the ¥130 level, so it does suggest that perhaps is waiting to see what Federal Reserve Chairman Jerome Powell has to say on Wednesday. This would make a lot of sense, because the pair is traditionally very highly correlated to the 10 year interest rate differential between the 2 countries.

Ultimately, there’s a huge debate going on right now whether or not the Bank of Japan will have to continue to print yen to keep yields down, or if rising interest rates are a thing of the past. We have seen a couple of different days where the interest rates have spiked around the world, and that of course has people thinking that that Bank of Japan will continue to print. Regardless, they are by far the loosest of the major central banks, so it does make a certain amount of sense that the yen suffers again. This would be especially true in this pair if Jerome Powell is hawkish on Wednesday, which quite frankly I expect him to be.

That being said, if he is not as hawkish as feared, then it’s possible that we could see this market rollover. The ¥127 level underneath is a massive support and massively important. If we were to give that up, then it is very likely that we would see a major breakdown. On the other hand, if we can take out the ¥132 area, it’s possible that we could continue the upward momentum.

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