USD/JPY Forecast – US Dollar Pulls Back Against Yen

USD/JPY Forecast Video for 04.08.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially tried to rally a bit during the trading session on Thursday, but then turned around to reach toward the ¥142.50 level. That being said, the market is likely to see a lot of noisy behavior, especially as we are starting to head into the jobs number on Friday. Ultimately, I think this is a scenario where the market will continue to look at the overall interest-rate differential favorably, and therefore I think we’ve got an uptrend that has quite some distance to travel.

Keep in mind that the Non-Farm Payroll announcement comes out on Friday, and therefore it’s likely that we will see a lot of volatility between now and then. That being said, the market is likely to continue to see a lot of volatility, and quite frankly I think if we get some type of significant pullback from here, it ends up being a nice buying opportunity. 50-Day EMA sits right around the ¥140.55 level and is starting to reach even higher. That should offer a bit a dynamic support, so I think any drop from here should end up being a nice opportunity to get “cheap US dollars.”

The Bank of Japan has recently shown itself to be very loose with its monetary policy, despite the fact that they tried to jawbone the market lower last week. In fact, the very first thing they did this week was step in and start buying bonds, thereby showing that their true intention will be for quantitative easing going forward.

Quite frankly, the Japanese have so much in the way of debt that they cannot let interest rates spike too much, because it would be horrible for the economy. That being said, that means that the currency will continue to drop. Remember that the Japanese economy is highly sensitive to exports, so a cheap currency is not necessarily a bad thing, but occasionally the Bank of Japan will pay lip service to the idea of trying to protect its currency. This is kind of like the Federal Reserve saying that they have a “strong dollar policy.” Everybody knows that it’s complete nonsense and the charts show it over the longer term.

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