USD/JPY Forecast – US Dollar Continues to Threaten 200-Day EMA

USD/JPY Forecast Video for 12.04.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar drifted a bit lower during the trading session on Tuesday in the early hours, but we have seen buyers come in underneath the 50-Day EMA to show signs of life again. Just above, we have the 200-Day EMA coming into the picture, so if we can break above that technical indicators very likely that we continue to go higher. You can also make an argument that we have just formed yet again another double bottom at the ¥131 level, which is of course after forming a double bottom at the ¥127.50 level.

Now that we are trying to form another “W pattern”, it suggests that we are going to continue to see upward pressure, perhaps an attempt to get to the ¥137.50 level above. This will be especially true if we continue to see interest rates start to rise, or perhaps if we start to see more money flow into the treasury market, which is the exact opposite quite frankly. If treasuries continue to attract a lot of inflow, then it does make sense that the US dollar should continue to strengthen, as it takes the very same US dollar to buy those notes.

Keep in mind that the Bank of Japan continues its yield curve control policy, meaning that they are not going to let the 10 year JGB offer more than 50 basis points of interest. Keep in mind that in order to do so, they have to print yen, and therefore it’s likely that we continue to see the Japanese currency lose ground if we see that scenario pop up again. After all, central bank actions will continue to be a major driver of where we go next.

Speaking of central banks, the Federal Reserve is expected to raise interest rates again during the May meeting, and therefore things should get tighter. Ultimately, this is a situation where we are eventually going to see this market go higher from everything I see. However, if we were to turn around and break down below the ¥127.50 level, then it’s possible that we could start to really fall apart.

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