USD/JPY Forecast – US Dollar Continues to Look Strong

US Dollar vs Japanese Yen Technical Analysis

The US dollar continues to find buyers on dips against the Japanese yen. The US dollar rallied a bit during the early hours on Monday using the 149.80 yen level as a bit of a floor. And it looks as if we are going to continue to go back and forth, trying to build up enough momentum to continue going higher.

If we break down below the bottom of the candlestick on Thursday, then we have the 50 day EMA waiting around to offer plenty of support. And then after that, the 147.33 level offers a floor. At this point, it looks like the 152 yen level above is a major resistance barrier and breaking that of course could bring in a lot of FOMO.

I think once we break above there, then you’re looking at a move to the 155 yen level rather quickly. Either way, we’re in an uptrend, but recently have been working off some of the excess froth, which of course is something that happens from time to time when you suddenly take off like we have. The interest rate differential continues to favor the US dollar and work against the Japanese yen, and I think that continues to be the case going forward.

While the Federal Reserve is expected to cut rates sometime this year, the interest rate is still much higher than the one they see in Tokyo. Because of this, you get paid to hold on to this pair, and therefore, I think you get a situation where every time you pull back, there are value hunters coming in to pick things up. The interest rate differential pays you quite well over the long term, and a lot of longer term institutional players are out there taking advantage of that in what is called the carry trade. With that being said, I have no interest in selling this pair.

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