USD/JPY Forecast – US Dollar Looks Ready to Pull Back

USD/JPY Forecast Video for 22-01-2024

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially rallied against the Japanese yen during trading on Friday but did give back gains rather quickly. This makes a certain amount of sense because quite frankly, we’ve gone straight up in the air for a couple of weeks now. With that being the case, I do think that we are in line to see a little bit of a pullback, but that pullback should end up being a buying opportunity. Only time will tell, but generally buying the dip has worked.

While the US dollar fell rather aggressively against the yen late in 2023, the reality is the Bank of Japan has made it clear that they are not willing to step in and tighten monetary policy, which is exactly what it would take for the yen to truly strengthen at this point. The Japanese yen is getting hammered against multiple other currencies, so I think overall it’s more yen weakness than anything else that’s driving this pair.

Now that it looks like we’re ready to pull back, I’ll be paying attention to $147.33 underneath, followed by the 50-day EMA indicator. After that, you have the 145 yen level, which I also think will be very important. We could continue to go straight up in the air from here, but the reality is you want to try to find value. You don’t want to buy things when they’re expensive. And right now, the US dollar is just a little bit expensive against the Japanese yen.

Regardless, my plan is to buy the dip and buy in small increments to build up a position trying to get to the highs near the 152 yen level. As far as selling is concerned, I don’t have any interest in doing so unless the Federal Reserve suddenly becomes very aggressive with its interest rate cuts and the Bank of Japan changes its overall attitude, neither of which I expect to see in the short term. With that, I look at pull banks as an opportunity to take advantage of a longer term trend, and we’ll continue to favor the upside.

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