USD/JPY Forecast – US Dollar Continues to Threaten a Breakout Against the Japanese Yen

USD/JPY Forecast Video for 24.02.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the trading session on Thursday as we continue to pay close attention to the ¥135 level. Over the last couple of days, we have seen the 10 year yield in Japan test that crucial 50 basis points level, so therefore I think we will continue to see the Japanese yen and struggle a bit. After all, the Bank of Japan will do everything they can to keep the interest rates below that level, therefore I think you got a situation where you probably see the market react directly to that rate movement. The Bank of Japan will have to continue to print Japanese yen, thereby flooding the market with currency as long as interest rates remain high.

As central banks around the world continue to look like they are going to be tight for longer, bonds start to offer attractive yields that Japan simply does not offer. Because of this, the Bank of Japan will have to do everything it can to support its bond market, as nobody really wants to buy the paper. In fact, we are getting to the point where the Bank of Japan owns a majority of bonds, and the Japanese are essentially stuck. They can either have low yields and an extremely weak currency, or they can have a reasonably strengthened currency, but have to let yields rise. Japan is by far one of the most indebted countries in the world, so therefore it’s essentially a bug looking for a windshield.

As inflation remains a major problem in the United States, the Federal Reserve is nowhere near trying to loosen monetary policy, so therefore it’s very likely that the USD/JPY pair continues to see plenty of upward momentum over the longer term. Whether or not that happens today or next month or next year, I do not know but it certainly looks like we are building up quite a bit of pressure, and that pressure will eventually have to be released. Breaking above the short-term resistance just above could open up a move to the ¥137.50 level. Underneath, the 200-Day EMA offers quite a bit of support, just as the 50-Day EMA will.

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