USD/JPY Forecast – US Dollar Pulls Back Against the Japanese Yen

USD/JPY Forecast Video for 07.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar fell on Thursday, as it looks like we are finally starting to see gravity come back into the picture. After all, the market has been going straight up for some time, and therefore it does make a certain amount of sense that we would see some profit-taking. The ¥142.50 level underneath should offer support, as it was previously important. With that being said, the market is likely to continue to see buyers looking to take advantage of any dip in price, as the market continues to be very bullish.

Keep in mind that the Bank of Japan will continue to be loose with monetary policy, as inflation is nowhere to be found in Japan. At the same time, the Federal Reserve will almost certainly have to remain very tight with its monetary policy, so I do think that eventually the overall fundamental situation continues to push to the upside.

If we do break down below the ¥142.50 level, then it opens up the possibility of a drop down to the 50-Day EMA, which is sitting at the top of the previous bullish flag. With this, I look at the 50-Day EMA as a potential “floor in the market”, and therefore you have the scenario where value hunters will continue to come into the picture and trying to take advantage of “cheap US dollars.” Ultimately, this is a scenario where I see a lot of potential, but you may wish to stand on the sidelines for the short term, in order to take advantage of what could be a much better opportunity.

I have no interest in shorting this pair, and I believe this is more or less going to be a bit of profit-taking, not some type of major shift in the attitude of traders. Ultimately, this is a situation where the trend is very much ensconced in the market, and therefore I will be looking for opportunities that show signs of buying pressure reentering the market. In fact, until the fundamental differences between the Bank of Japan and the Federal Reserve change, I have no interest in trying to fight what has been a massive trend.

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