USD/JPY Forecast – US Dollar Hits Barrier Against Yen

USD/JPY Forecast Video for 09.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied significantly during the early hours on Wednesday against the Japanese yen, but it looks as if the yen is starting to form a little bit of a defense near the ¥138 level. With this in mind, it does make a certain amount of sense that we would see a bit of hesitation, as we have seen so much in the way of momentum so far. Otherwise, we may just be running out of the buying frenzy that we had seen.

If we can break above the top of the candlestick, then it’s possible that we could send this market to the ¥140 level, which is a target of mine in the short term. That doesn’t necessarily mean that we won’t pull back, and I do think that the pullback is probably necessary for traders to come into the picture and start to pick up the dollar again. Keep in mind that Jerome Powell stated on Tuesday that the Federal Reserve may have to raise interest rates much quicker than anticipated, therefore it’s likely that we would see a lot of US dollar strength in general.

On the other hand, if we do pull back rather significantly the ¥135 level could be the barrier that buyers used to take advantage of. The 50-Day EMA has just broken above the 200-Day EMA, so it does make a certain amount of sense that we would see longer-term traders looking to get involved as well. After all, it was a massive selloff that we had recently endured here, but it’s probably worth noting that the market turned around at the 50% Fibonacci level from the massive move higher last year, and of course the Bank of Japan is still playing the same game with yield curve control.

If they want 50 basis points on the 10 year JGB, they will have to continue to print yen, and therefore drive down the value of the Japanese currency in general. Add to that the fact that the Americans are tightening monetary policy, this sets up a perfect opportunity for this pair to continue going higher.

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