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

USD/JPY Forecast Video for 03.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially tried to rally during the trading session on Friday as we head into the weekend. That being said, a lot of profit-taking has hit the wires, as traders are trying to do everything they can to collect profits from an impulsive move. We are a bit stretched at this point, so this should not be a huge surprise. With that being the case, I look at this market for support near the ¥142.50 level, so we could be seeing the beginning of a slightly significant pullback. However, this pullback should be a nice buying opportunity for those looking to pick up “cheap US dollars”, or at least sell overvalued Japanese yen.

On the upside, I see the ¥145 level as a major resistance barrier, so it will be interesting to see how that plays out. The market will really start to take off above the ¥145 level, but at this point, I think we’ve expended so much energy that it does make a certain amount of sense that we have to pull back and find a bit of momentum. The bullish flag that we broke out of recently measures for a move toward the ¥148 level, and of course, we have the ascending triangle that also measures to that area. Because of this, I think we have a situation where the market still is very bullish, but a little bit of a breather makes quite a bit of sense.

Keep in mind that the interest rate differential between Tokyo and the Federal Reserve is extreme, and therefore it’s likely that we continue to see this major divergence between the 2 currencies. With this, you get paid to hold onto this pair, via the swap. With that being said, the market is likely to continue to go higher over the longer term, but I’m looking for some type of pullback in order to find value. The fact that Americans have a major holiday on Tuesday means that a lot of the largest US firms will probably be essentially closed on Monday as well. This could lead to a better profit-taking also.

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