USD/JPY Forecast – US Dollar Continues to Look for Higher Rates Against Yen

USD/JPY Forecast Video for 18.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the trading session on Wednesday as we continue to see more upward pressure against the Japanese yen. The Bank of Japan continues its yield curve control policy, which of course means that they will be flooding the market with Japanese yen if rates get anywhere near 50 basis points. This makes the currency a lot less attractive for traders, and therefore it’s not a huge surprise that we see ourselves in this environment. Ultimately, this is a market that will have to figure out what it wants to do but obviously the ¥138 level is an area that a lot of people are focusing on. Breaking above that would break above the top of the ascending triangle that we have been forming for so long now.

On that breakout, the market is more likely than not going to head toward the ¥148 level over the longer term, but that is probably more or less a bigger move that will take some time, not necessarily something that happens overnight. With that being the case, I remain bullish but I also recognize that occasionally we may have to wait for some type of short-term pullback in order to get involved. Once this market does break out, I fully anticipate that the trade will start to pick up momentum, but again, I do not necessarily think that it’s going to be straight up in the air. Keep in mind that the market is going to continue to be very driven by interest-rate differential, so you will have to pay close attention to the bond markets and the central banks in general.

Underneath, the 50-Day EMA is starting to turn higher, showing that momentum is building up. The 50-Day EMA and the 200-Day EMA both sit near the ¥135 level, so I consider that to be the short-term floor in the market as things stand at the moment. That being said, the US dollar course is going to be all over the place as the world worries about global growth. Expect volatility, but it’s obvious that the market wants to go higher eventually.

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