USD/JPY Forecast – US Dollar Continues to Stretch to the Upside

USD/JPY Forecast Video for 09.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the Monday trading session, as the moving averages underneath have offered a bit of support. The market is fighting with the ¥135 level, trying to break above it and move much higher. Ultimately, this pair continues to pay close attention to the interest-rate differential, as the Federal Reserve is very hawkish, while the Bank of Japan continues to do everything it can to fight rising interest rates, with each yield curve control policy. Remember, the Bank of Japan has a cap on interest rates for the 10-year JGB at 50 basis points. In other words, every time the bond market starts to sell off, the Japanese step in and start buying their own bonds in order to keep interest rates down. In order to do that, they have to flood the market with more Japanese yen.

On the other hand, there is a rather tight monetary policy coming out of the United States and it will stay that way for some time. In other words, it’s likely that we will continue to see more upward pressure than anything else but it does not necessarily mean that it will be easy, mainly because the US dollar itself is having a hard time. What this chart tells me is that the Japanese yen will continue to lose ground, but you may be better off going with a top different currency against the yen.

Regardless, we are in an ascending triangle, and I do think that we will eventually try to break above the top. That would be a move above the ¥138 level, but it might be very noisy between now and then. Because of this, it is more of a “buy on the dips” type situation, and therefore a little bit of patience and waiting to build up a larger position might be the best way to go. After all, the volatility can be quite stressful on your account if you are over-levered right away. In other words, be cautious and take your time to build up a position to the upside.

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