USD/JPY Forecast – US Dollar Continues to Test Support

USD/JPY Forecast Video for 17.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has pulled back a bit during the trading session on Thursday to test the ¥132.50 level again. This is an area where we have seen support over the last week or so, and previously had been resistance on the way higher. At this point, the market is very likely to continue to look at this as an area of interest, so therefore it does make a certain amount of sense that we would look at this for guidance.

Keep in mind that the Bank of Japan continues its yield curve control policy, keeping the 10 year interest rate in Japan at 50 basis points or less. In order to accomplish this, they must print yen in order to buy those bonds. Every time they do, that floods the market with more currency and therefore weakens the Japanese currency. The market participants will continue to look at the supply/demand equation through this prism and pay close attention to bond yields around the world. Upon yields around the world are generally rising, that will put pressure on the Japanese yen.

While there does seem to be a lot of concern around the world due to contagion fears and the banking system, it now brings up the possibility that central banks around the world will have to loosen their monetary policy. However, that doesn’t necessarily mean that the central banks will do so, just that some traders out there believe that will be the next move. At this point though, it’s worth noting that the markets are literally moving back and forth with the bond markets, and therefore you need to have an eye on both. All Japanese yen denominated pairs are behaving in the same manner, as these pairs tend to be more about the Japanese yen than the quote currency.

It’s worth noting that the 50-Day EMA is trying to cross back under the 200-Day EMA, so mechanical systems may be kicking off him and trade soon as well. Either way, and looks like we have a lot of noise more than anything else in the short-term as we try to figure out what to do with interest rates.

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