USD/JPY Forecast – US Dollar Gives Up Early Gains Against the Japanese Yen

USD/JPY Forecast Video for 16.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially tried to rally during the trading session on Wednesday, to reach the ¥135 level. This is an area that has previously been resistance, and therefore the fact that we broke above that level would have been a very strong sign, but we have given back those gains to show signs of weakness since then. At this point, it looks like we are reaching down to the ¥132.50 level, an area that I think should end up being support. If we can break below there, then it’s likely that this market starts to fall toward the ¥130 level.

This all began with concerns with Credit Suisse, as Saudi financiers decided that they were no longer going to try to prop up the bank. Now we have to worry about contagion in the banking system, and as a result a lot of money flew into bond markets. Remember, the Bank of Japan is trying to fight higher interest rates right now, so therefore they have to step into the bond market and purchase those bonds with freshly printed in Japanese yen to keep the rates under 50 basis points on the 10 year. On the other hand, if rates start to drop around the world, then it’s likely that there is less pressure on the Bank of Japan, meaning that they will be buying less yen, and then meaning that the Japanese yen will strengthen, which is exactly what we see on this chart.

The more fear that we have out there, the more likely it is to be a situation where the Japanese yen gets a bit of a boost, and therefore as long as his fear is out there, we may see the Japanese yen be one of the better performing currencies. As soon as the market continues to see a lot of relief, then this market will turn right back around. That being said, these are very dangerous days so don’t be surprised at all that the market would be very volatile and noisy, so in this environment you need to keep your position size relatively small until you get confirmation of your position.

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