USD/JPY Forecast – US Dollar Rallies as Interest Rates Do The Same

USD/JPY Forecast Video for 28.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied quite significantly during the trading session on Monday, as we have seen an 11 basis points rally in the 2 year yield before the Americans even got on board. With that being the case, it makes quite a bit of sense that we would see the US dollar rallied against the Japanese yen due to the interest rate differential. Furthermore, the Bank of Japan continues to keep its yield curve control policy intact, meaning that they will be fighting any rally at this point near the 50 basis point level, and therefore have to print more Japanese yen to buy those bonds. By printing that yen, you flood the market with supply, and the value of the yen drops as a result.

It’s also worth noting that the 130 and level offered significant support on Friday, and therefore it does look like the market is willing to pay close attention to these big figures again, especially as it was a hammer on the Friday candlestick that we formed. Just above, we have a significant amount of resistance near the ¥132.50 level, and then again at the ¥133.50 level, where the 50-Day EMA currently resides. It’s also worth noting that the moving averages are starting to drop, so it’ll be interesting to see if that has a major influence or not.

Underneath current trading, we had seen the ¥127.50 level offer a significant amount of support, and we ended up forming a bit of a double bottom at that level that seems to be telling us that the market still wants to be bullish. That being said, if we broke down below that level, it could kick off major selling in this market.

At this point, it still looks as if we are going to see more of a “buy on the dip” mentality in this market, and I have been trading it as such. However, you have to be willing to deal with quite a bit of volatility along the way, as there are so many uncertainties out there at the moment. Because of this, I remain bullish of the greenback against the yen.

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