USD/JPY Forecast – US Dollar Continues to Grind Away

USD/JPY Forecast Video for 10.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has gone back and forth during Tuesday’s trading session as we try to break above the ¥135 level. This is an area that has been very noisy as of late, but when you look out at the longer-term charts, you can see that we are in a massive ascending triangle, and I do think that it makes a lot of sense that we will eventually see the US dollar overtake the Japanese yen. This is mainly because of central bank differentials.

The Bank of Japan continues participating in quantitative easing by keeping a hard cap on the 10-year bond at 50 basis points. The Federal Reserve is in an aggressive quantitative tightening phase, and even though they may be pausing their hikes over the next couple of months, the reality is they are also working off their balance sheet, which is a way of tightening monetary policy through alternate channels. With this, the Bank of Japan will flood the market with the Japanese yen every time interest rates rise to buy bonds and keep those yields down. On the other hand, there is a bit of a shortage of US dollars worldwide right now, as most debts are in the US dollar, and many foreign debtors will continue to demand greenbacks to pay those off.

The 50-Day EMA and the 200-Day EMA indicators suggested below could offer significant support. Therefore, pullbacks will continue to be considered buying opportunities. Ultimately, this situation is where we try to get to the upside and the top of the triangle. This would be the ¥138 level, which would open up the possibility of moving to much higher levels. For example, the “measured move” from the triangle suggests that the pair could go all the way to the ¥147 level, an area that has been important in the past. All things being equal, this is very choppy behavior, but it is behavior that favors the upside in general, and therefore I think we will continue to see buyers pick up US dollars when they can, and at this point I don’t have any interest in trying to short this market.

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