USD/JPY Forecast – US Dollar Continues to Look Strong Against the Yen

USD/JPY Forecast Video for 28.02.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has pulled back slightly during the trading session on Monday but continues look very strong as it is a very minor pullback but should also be noted that the market was relatively quiet, especially considering just how bullish it had been previously. Because of this, it looks as if the market is going to try to go to the ¥137.50 level, an area that previously had been significant resistance. If we can break above there, then it’s possible that the market could go to the ¥140 level.

If we pull back from here, the ¥135 level courses a large, round, psychologically significant figure, in an area that previously had been resistance. The fact that we broke above there should now have “market memory” attached to it, suggesting that there should be plenty of value hunters in that general vicinity. The Bank of Japan continues to keep interest rates low and fight 10 year yields from rising above 50 basis points.

In order to do so they will have to continue to print yen in order to buy their own bonds in Japan. In other words, if rates start to rise again, that will only help the US dollar clobber the Japanese yen. You can also see that the Japanese yen is getting the same treatment almost everywhere, so this is most certainly a Japanese Yen situation more than it is a US dollar situation.

Looking at this chart, I do think that the trend is starting to change, so I think it’s probably only a matter of time before we try to reach towards the top again as the Bank of Japan has dug in its heels when it comes to yield curve control and has reiterated multiple times that it was going to be stuck in it. At the same time, we have the Federal Reserve making it abundantly clear that it is going to stay “tighter for longer”, meaning that monetary policy in the United States will be much more restrictive than many other economies around the world, thereby making the US dollar attractive.

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