USD/JPY Forecast – US Dollar Continues to Grind Slightly Higher Against the Yen

USD/JPY Forecast Video for 11.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied slightly against the Japanese yen during the trading session on Wednesday, as we continue to see the market reach above the ¥135 level. Ultimately, this is a situation where we are doing a bit of a “carriage trade”, and of course as long as the Bank of Japan continues to see its monetary policy through, it doesn’t bode well for the Japanese yen as they will have to keep the 10 year yield at 50 basis points or lower, and that’s done by printing currency. As long as they are flooding the market with currency, then there’s no real reason to believe that the Japanese yen will strengthen longer term.

When you look at the chart, you can make out an ascending triangle, and that of course is something that we should pay close attention to, as it is a large signal that the market may continue to go higher. If we can break above the ¥138 level, it would be the top of the triangle being violated, and then it opens up a much bigger move. At that point, the “measure move” allows the USD/JPY pair to go as high as ¥148 over the longer term. That would be a revisit of the recent high, and when you look at the chart, although there has been a nice recovery of the Japanese yen, the reality is that the fundamental situation has not changed. Yes, traders are starting to think that the Federal Reserve is done raising rates, but they are light years away from loosening monetary policy. If that’s going to be the case, then the interest rate differential alone will keep this market somewhat levitated.

Keep in mind that the CPI number is coming out later in the day, and that of course will have a major influence on what happens with the US dollar. All things being equal, this is a market that has had a nice pullback to the 50% Fibonacci region from the massive move last year, and I think is trying to continue its uptrend at this point.

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