USD/JPY Forecast – US Dollar Drops Against The Yen

US Dollar vs Japanese Yen Technical Analysis

The dollar has dropped pretty significantly early during the trading session against the Japanese yen on Thursday, as it looks like we are going to try to approach the 147.33 level, an area that I do think remains fairly supportive, so I am interested in buying on some type of bounce. I also recognize though that the jobs number on Friday will be the real story here, so do keep that in mind. In fact, this is quite normal behavior for this pair just ahead of that massive economic announcement.

With that being the case, I think you’ve got a situation where market participants will continue to pay close attention to the interest rate differential, and because of that, we will have to be very cognizant if there is one Bank of Japan governor that suggests that they could raise rates by 10 basis points, but that still only brings the Japanese interest rate to zero. The testimony by Jerome Powell in front of Congress during the session on Wednesday may have been part of what we are seeing played out here due to the fact that he suggested that they will probably be cutting rates sometime this year.

The interest rate differential will still be extraordinarily wide, and it is expensive to hang on to Japanese yen over the US dollar longer term. So, I do think that we get a bit of a bounce. That will be especially true if the jobs number comes out a little hotter than anticipated. So, I do think Friday could potentially turn this pair around. I don’t have any interest in shorting it and I still like buying the dip despite the fact that, so far, Thursday has been pretty tough. Either way, I’m looking for an opportunity to get long, and a little bit of a selloff could go a long way for those looking to buy “cheap US dollars.” I have no interest in buying the yen under any circumstance at this point in time.

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