USD/JPY Forecast – US Dollar Continues to Look Supported

USD/JPY Forecast Video for 24.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has gone back and forth during the trading session on Tuesday as we are sitting on top of the ascending triangle that the market had recently broken out of. That being said, the market looks as if buyers will continue to get into the market and go reaching toward the ¥140 level. The ¥137 level underneath is going to continue to be supported, and if we were to break down below there, the market could go down to the ¥135 level, an area that should offer a certain amount of support, based upon the psychology of it being a large, round, psychologically important figure. Furthermore, we have a 50-Day EMA approaching that level, and should offer a bit of technical support.

That being said, keep in mind that the interest rate differential between the United States and Japan continues to be wide, and that continues to favor the US dollar quite drastically as the Federal Reserve remains tight. The Bank of Japan continues to practice quantitative easing, via the yield curve control. Remember that the Bank of Japan is putting a lid on interest rates on the 10 year note at 50 basis points, and in order to do so they need to print Japanese yen in order to buy those very same bonds at times. This floods the market with excess currency, therefore it drives down the value of the Japanese yen. On the other hand, with the Federal Reserve remaining tight, that drives up demand that the US dollar in general. All things being equal, this is a situation where we would see a lot of volatility, but ultimately I do think that we get more upward momentum than anything else. For what it is worth, the “measured move” suggests that we could go as high as ¥148 given enough time.

I do like the idea of buying dips, and don’t really have any interest in trying to short this pair anytime soon. If the market were to break down below the 200-Day EMA, then it could show quite a bit of negativity and it could change some things, but as things stand right now it looks like this market is going to go higher given enough time.

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