USD/JPY Forecast – US Dollar Pulls Back but Recovers

USD/JPY Forecast Video for 29.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially fallen during the trading session on Friday, but found enough support underneath to have plenty of “FOMO traders” trying to pick up momentum. Ultimately, it looks as if we are challenging the ¥140 level, and if we can clear that area clearly, that could be a very good sign for a resumption of the longer-term trend. Now that we are out of the ascending triangle, this has become an impulsive move to the upside, but it’s probably worth noting that we will have the occasional pullback. That pullback should offer plenty of buying opportunities, with the ¥138 level off in a bit of “market memory” underneath as the area had been the top of the ascending triangle that we just broke out of.

Looking forward, this will probably be more of the same, due to the fact that the Bank of Japan continues its yield curve control policy, and of course the Federal Reserve is still tight. In fact, Fed Funds Futures have risen recently on bets that the Federal Reserve may have to continue tightening. If that’s going to be the case, then the interest rate differential alone will almost guarantee that this pair has to go higher. Eventually, the Japanese will have to decide whether or not they want to fight higher interest rates, or if they are going to defend their currency.

In fact, as things are standing right now there are some pundits calling for this pair to go to the ¥200 level, which sounds extreme, but when you look at it through the prism of what happened last year, you could see just how quickly this can continue higher. If the Federal Reserve does in fact start reiterating its tight monetary policy and the market starts to react to it, this could be one of the more explosive moves of the year. However, regardless what happens next the “measured move” of the ascending triangle suggests that we are going to the ¥148 level anyway, so at the very least that’s my target for a larger swing trade. I have no interest in shorting this pair anytime soon as the fundamentals simply just do not make sense for doing so.

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