USD/JPY Forecast – US Dollar Continues to Stabilize

US Dollar vs Japanese Yen Technical Analysis

You can see that the dollar continues to go somewhat sideways against the Japanese yen as we are simply hanging around, trying to sort out whether or not we can go higher. If we can break above the 50 day EMA, then it opens up the possibility of going to the 149.80 yen level, an area that I think will eventually be tested. Keep in mind the interest rate differential between the two currencies is still pretty strong and therefore you have to look at it through the prism of whether or not we’ll be able to get paid at the end of every day, and I think we will as that swap will remain strong.

Ultimately, if we do break down below the lows of the last couple of sessions, then the 200 day EMA comes into the picture as a potential support level as well. So really at this point, I don’t think you need to get too cute with this. I think you need to look at this as an opportunity to find value every time it dips because eventually that interest rate differential is going to continue to be a major factor in what we see.

Keep in mind that the Bank of Japan is light years away from doing anything to tighten its monetary policy. And although the Federal Reserve may loosen, they are pretty strong with their monetary policy at the moment as well. So, at the same time, it just makes sense that we eventually go higher. This is a market that I think you continue to see a lot of the same action that you’ve seen on the way out, although it certainly looks as if the momentum is probably starting to slip at this point in time, which does make a certain amount of sense as the Federal Reserve may start to loosen again.

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