USD/JPY Forecast – US Dollar Drops After NFP

USD/JPY Forecast Video for 07.08.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially tried to rally a bit during the course of the trading session on Friday, breaking above the ¥142.50 level. That being said, the jobs number was cooler than anticipated, coming in under the expected amount. Furthermore, traders have extrapolated this into the idea that perhaps the Federal Reserve may not have to be as tight as they have been, but that’s absolute nonsense and this market will turn around. The interest rate differential alone drives this pair higher over the longer term, so I’m looking at this as a potential buying opportunity.

Having said that, the market has been very noisy as of late, and it’s not necessarily going to be a situation where the market turns around and go straight up in the air. Nonetheless, the Bank of Japan continues to be very loose with the monetary policy, that of course works against the value of the Japanese yen. The 50-Day EMA underneath sits near the ¥140.55 level, and is rising. I think that’s probably the short term “floor in the market” going forward.

If we break above the top of the candlestick for the trading session on Friday, that opens up the possibility of a move toward the ¥145 level. The ¥145 level is an area that will attract a lot of attention, but if we can break above there, then it’s likely that we can look into the ¥150 level. Underneath, if we break down below the 50-Day EMA, it’s possible that we could go down to the ¥138 level, which has been important multiple times.

I think anything below there gets a massive trend change underway, but it seems very unlikely. All things being equal, you get paid to hold onto this trade, so I think that you got a situation where it continues to be a longer term “buy-and-hold” market, but that doesn’t necessarily mean that we will always go straight up in the air. I am already long of this market, and will remain so. I’m not over levered, I understand that this is a pair that is typically volatile and have to position myself as being in that type of market.

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