USD/JPY Forecast – US Dollar Continues to Pull Back Against the Yen

Christopher Lewis
Updated: Mar 20, 2023, 13:45 UTC

The US dollar has pulled back a bit against the Japanese yen as traders are all over the place. Ultimately, this is going to be about interest rates more than anything else.

US Dollar, FX Empire

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USD/JPY Forecast Video for 21.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially tried to rally against the Japanese yen during trading on Monday but has since plunged as the interest rate markets around the world continue to see a lot of volatility. After all, this is going to be about whether or not the Japanese will have to deal with yield curve control pressures or not. Ultimately, there are a lot of questions as to what the Federal Reserve will do next as well, as the banking bailouts over the weekend have people thinking that perhaps the Federal Reserve will finally pause.

This has been the narrative all along, that something would make “Uncle Jerome” come and save everyone. Whether or not that’s actually true remains to be seen, because quite frankly, inflation is far too strong at this point in time to think that they won’t raise it all, but that is one of the narratives being kicked around. If that’s going to be the case, it will allow the Japanese yen to appreciate against the dollar again. On the other hand, if they do sound like they are ready to continue raising rates, that could send this market much higher.

The biggest problem right now is that a lot of this is going to be a guessing game. Keep in mind that the markets are always trying to get in front of the Federal Reserve and other central banks, so expect a lot of noise over the next couple of days. Regardless of what happens next, expect to be a very noisy move. There’s so much uncertainty out there right now that it’s difficult to get overly aggressive with anything, so that’s probably something you need to keep in mind.

The ¥130 level underneath should continue to be support, just as the ¥127.50 level will be. In this scenario, I’m looking for some type of pullback that shows supportive action that I could start buying again, because I do believe that eventually people were going to be running to the US dollar for safety regardless of interest rate differentials as there are so many economic concerns at the moment.

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

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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