USD/JPY Forecast – US Dollar Pulls Back From Resistance

USD/JPY Forecast Video for 10.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has pulled back during the Thursday session against the Japanese yen, solidifying the idea of the ¥137.50- ¥138 level being a significant barrier above. This resistance will be difficult to break above, as we had seen so much resistance previously, but if and when the market does break above there, it could lead to rather quick gains.

After all, the Bank of Japan continued to do yield curve control over the last several weeks, showing their commitment to keep and 10 year yields at 50 basis points or less. In order to do this, they unfortunately need to print as many yen as possible to buy those bonds, so it does put downward pressure on the value of the Japanese currency. On the other side of the Pacific, you have Jerome Powell reiterating the Federal Reserve’s desire to keep interest rates tight and may even need to speed up the process. During his testimony in front of Congress, he made it very clear that not only will the Federal Reserve stay tight with its monetary policy, but conditions are making it possible that they may have to do so much quicker, thereby driving the value of the dollar higher and this won’t happen in a vacuum.

When I look at this chart, it’s easy to see that the ¥135 level underneath could be the next major support level, and of course we recently had the 50-Day EMA break above the 200-Day EMA, forming the so-called “golden cross.” While a lagging indicator, a lot of longer-term traders look at it as a signal to “buy-and-hold” an asset. Whether or not that is a smart trade remains to be seen, but clearly, we have seen a major turnaround in this pair, right at the 50% Fibonacci level of the massive move from last year.

Because of this, one would have to think that eventually we will make it much higher, and of course until the central banks in both Japan and the United States change their tune, there are plenty of fundamental reasons to think that this pair will continue to go higher. Short-term pullback should more likely than not offer buying opportunities.

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