USD/JPY Forecast – US Dollar Recovers After Initial Drop

USD/JPY Forecast Video for 21.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially pulled back a bit during the trading session on Thursday, but then turned around to show signs of life as we continue to threaten the 50-Day EMA. The 50-Day EMA of course is a large widely followed technical indicator that a lot of people would pay close attention to. All things being equal, I think this is a market that continues to see plenty of buyers attracted to it, and it’s possible that we could break above the ¥140.50 level. If the ¥140.50 level gets taken out to the upside, then it’s very likely that we go looking to the ¥142.50 level after that, as it is an area that’s been important in the past.

Keep in mind that the Bank of Japan continues to be very loose in its monetary policy, and that of course works against the value of the Japanese yen. On the other side of the equation, we have the Federal Reserve and its tight monetary policy. Despite the fact that some people are looking for the Federal Reserve to loosening its policy stance, the reality is they are light years away from doing so, and therefore it makes quite a bit of sense that we would see traders continue to hold on to this pair, as it pays them at the end of each day through positive swap.

Underneath, the ¥138 level continues to be an area of significant support, and we have in fact bounced from there. It was the previous top of an ascending triangle, so with that being the case, the market is likely to see this is an area where there is a bit of a bottom in the market. Speaking of the ascending triangle, the “measured move” suggests that this pair could go to the ¥148 level over the longer term, but when we get there remains to be an open question. Regardless, I do think that we go higher given enough time, but it’s probably not going to be an easy path over the longer term, and I expect to see a lot of volatility.

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