USD/JPY Forecast – US Dollar Rallies to Kick Out the Week

USD/JPY Forecast Video for 31.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar rallied on Monday, continuing the big move that we had seen on Friday. During the early hours on Friday, the Japanese had an interest rate decision and statement, and due to the fact that the Bank of Japan has stepped into the bond market and started buying again, traders are betting that the Japanese are going to continue to be loose with their monetary policy, so therefore it does make a certain amount of sense that the Japanese yen could lose value. The ¥142.50 level is an area that we tested but pulled back from. All things being equal, the ¥142.50 level has been important previously, so if we were to break above there, then the market is likely to go looking to the ¥145 level.

On a pullback, the market then looks at the 50-Day EMA underneath as a potential new support level, which is right around the ¥140.50 level. Breaking down below that level then opens up the possibility of reaching toward the ¥138 level underneath, which is the top of the previous ascending triangle, and an area where we have seen a lot of support as of late.

Regardless, the way I think that the market is going to behave is a situation where we would have to look at pullbacks as a potential buying opportunity, as we have seen for quite some time. Alternatively, I think we do go looking to the ¥145 level, and then of course I think we could even break above there. If we do, that it opens up a move to the ¥150 level. Some pundits are calling for this pair to go to the ¥200 level given enough time, due to the fact that the Bank of Japan cannot do much due to the massive debt levels that the country finds itself, so therefore it cannot allow interest rates to rise too rapidly. In other words, the Japanese yen is probably going to be soft for quite some time, at least until the rest of the central banks around the world decide to start loosening monetary policy.

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