USD/JPY Forecast – US Dollar Continues to Grind Higher

US Dollar vs Japanese Yen Technical Analysis

The US dollar rallied rather significantly during trading in early Wednesday hours. Having said that, we do have the Federal Reserve meeting and that is going to throw a wrinkle into this. Quite frankly though, what I’m hoping for is some type of knee-jerk reaction to the downside that I can take advantage of. I’d be very interested in the 150 area if we get that significant of a sell-off. I don’t know that we’ll get that, but if we give up the gains early in the morning to reach somewhere right around 150.5, I think at that juncture I might be interested in going long as well.

We are near all-time highs, and we have the Bank of Japan out of the way. They clearly aren’t going to do anything to keep rates high by any search of the imagination. True, they did finally go positive with their interest rates, but you can still drive a truck between the interest rate levels of both countries. The interest rate swap paid at the end of every day continues to attract institutional traders, and therefore you can see exactly the market’s reaction.

Ultimately, if the Federal Reserve does sound a bit dovish, that might cause a pullback that you can take advantage of. The first reaction will be to sell the dollar, more likely than not, but at the end of the day, the interest rate differential is still going to be huge, so eventually cooler heads prevail. On the other hand, if Jerome Powell sounds hawkish, especially during the press conference, that’ll send this market straight up in the air. Either way, this is a one-way trade.

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