USD/JPY Forecast – US Dollar Reaches Toward 50-Day EMA

USD/JPY Forecast Video for 03.04.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied significantly during the trading session on Friday, breaking above the 50-Day EMA. We have pulled back since then, and of course it is worth noting that the 200-Day EMA sits just above there, so it does make a certain amount of sense that there is a little pocket of resistance. However, a lot of this is going to come down to what is going on with the bond market, and whether or not interest rates are rising or not.

The US has seen a bit of a boost in the interest rate markets, and therefore it suggests that perhaps inflation is still a significant concern. The market breaking above the 200-Day EMA could open up a potential big move, perhaps all the way to the ¥137.50 level. That being said, I also think we have a situation where it is going to continue to be noisy, but recently we have seen what could be a potential hard bottom to the market.

Recently, we had seen the market form a bit of a double bottom near the ¥127.50 level, which is a 50% Fibonacci retracement level from the entire move last year. Remember, we had seen the Bank of Japan enter its quantitative easing policy, keeping a maximum amount of interest that the 10 year yield can rise in that country. It was 25 basis points, but a couple of months ago the Japanese acquiesced, and allowed it to go to 50 basis points. What this means is that every time interest rates rise around the world, the Japanese have to print more yen in order to buy bonds to keep those yields down.

In other words, this is a market that is going to be highly manipulated by what’s going on in the bond market. In that scenario, you need to keep an eye on the 10 year JGB, which you can follow for free at tradingview.com. As rates rise, the Japanese yen loses strength, and of course vice versa. Furthermore, the US dollar finds strength due to the fact that rates in America are stubbornly high and it looks like we will continue to see this behavior going forward.

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