USD/JPY Forecast – US Dollar Recovers After an Initial Pullback

USD/JPY Forecast Video for 29.06.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially pulled back just a bit during the trading session on Wednesday but turned around to show signs of life against the Japanese yen again. Remember, the interest rate differential between the 2 currencies is extraordinarily wide, and that will continue to make the dollar more attractive than the Japanese yen. Ultimately, I do think that we continue going higher but we may be a little stretched at this point.

The ¥145 level above could offer a little bit of psychological resistance, but historically speaking, it has not been a major hub of activity. Because of this, I think you get a situation where you are still buying every dip, and it looks like the ¥142.50 level will offer support. After that, you have the top of the overall bullish flag that people will be paying close attention to, and therefore I think that could also offer a bit of a floor in the market.

Speaking of the bullish flag, it has a measured move to reach the ¥148 level. The market also had an ascending triangle underneath there that offered a potential move to the ¥149 level, so all things being equal, this is a situation that continues to favor the upside, despite the fact that we are stretched. All things being equal, this market continues to offer plenty of value on dips as the Federal Reserve stays tight with monetary policy, and of course the Bank of Japan continues to keep its monetary policy loose.

That being said, overnight the governor of the Bank of Japan did state that “extreme FX moves will not be tolerated”, something that they say all the time. This caused a little bit of a pullback, but you can see that the market has turned back around yet again. With this, I just don’t see an argument to be bearish of this market anytime soon, especially considering that you get paid to hold it with the positive swap. I am a buyer of dips going forward and remain so until the fundamental situation changes.

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