USD/JPY Forecast – US Dollar Continues to See Buyers on Dips

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied quite nicely against the Japanese yen during the early hours on Wednesday as we have bounced from the 50-day EMA.

The 50 day EMA sits just below the psychologically important 155 yen level, so it’s not a huge surprise to see that we did get a bit of a reaction. All things being equal, this is a market that I think when we do get short term pullbacks, buyers will look at that as a potential value play as the interest rate differential between the United States dollar and the Japanese yen is wide enough to drive a truck through and you get paid quite handsomely at the end of every day for holding this position. Ultimately, I think the 158 yen level above is going to be the next barrier. And if we can get above there, it opens up the possibility of the US dollar trading at 160 yen.

The 160 yen level is an area that the Bank of Japan felt to be a bit too much and they did in fact intervene, but we’ve seen the market for the most part ignore that, which is quite common. Really at this point in time, the market is likely to see the Japanese yen get punished because of the massive debts in that country. As long as that’s the case. This is a pair that I do think goes higher over the longer term. I’m a buyer of dips. I have no interest in shorting as the strength of the dollar and the weakness of the yen will continue to be a hard thing to fight.

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