USD/JPY Forecast – US Dollar Dips Against the Japanese Yen

USD/JPY Forecast Video for 15.12.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has dipped a bit during the trading session in the early hours of Thursday, breaking below the ¥142 level, but now it looks as if we are trying to sort out whether or not we can hang on to this. We are right around a major trend line, but we are also underneath the 200-Day EMA and now market participants are going to be paying close attention to the Bank of Japan next week. After all, if the Japanese choose to normalize their monetary policy, that could change a lot of things, especially now that the Federal Reserve sounded much more dovish during the day on Wednesday.

In the short term, I think it’s probably more likely than not that we try to drift lower, but I also recognize that under the best of circumstances the Japanese yen is a bit of a basket case. Ultimately, I think we got a situation where traders continue to pay close attention to the bond markets, and of course will parse that statement coming out of Tokyo next week. Now that the Fed has blinked and acquiesced to Wall Street’s demands for cheap money, it comes down to whether or not Tokyo will actually follow through. If they do, that could be epic for the Japanese yen, but I’m not holding my breath as they have a long history of being extraordinarily loose.

I think what we have is a situation where everybody is going to be waiting for the Bank of Japan, and then after that we might have a sudden move, but almost immediately drift into the holiday season and therefore liquidity issues. I’m not overly enthused about this pair right now, as we obviously have a lot to think about next week. In the short term, I would expect a lot of volatility and that will probably remain the case for the next couple of days. That being said, it certainly looks bearish at the moment so if I had to trade I would look for some type of breakdown to take advantage of, but right now, remember that you still get paid to hang on to the pair to the upside.

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