USD/JPY Forecast – US Dollar Recovers After Initial Selloff

US Dollar vs Japanese Yen Technical Analysis

The U.S. dollar has pulled back initially during the trading session on Friday, only to turn around and find buyers as we continue to see massive interest rate differentials come to fruition. The ¥152 level underneath will continue to be a major support level, and I think that as long as we can stay above there, we are kicking off the next leg higher in this pair.

With that being the case, I think you have to look at this through the prism of finding value on each dip, and you have to pay close attention to the idea of whether or not we can stay above the ¥152 level. Breaking down below there would obviously be very negative, but the 50 day EMA sits just above the ¥150 level and is an indicator that a lot of people would pay attention to.

Furthermore, the ¥150 level is also an area that a lot of people would pay attention to due to the fact that it is a large, round, psychologically significant figure. Because of this, every time we pull back, I just simply add to an already existing long position that I have and collect swaps at the end of every day. Remember, the Bank of Japan recently raised interest rates to basically zero, and although that is better for the yen, the reality is that the Federal Reserve may not be cutting this year at this rate, and therefore this carry trade lasts much longer.

I think at this point, we’re more likely than not to go looking to the ¥155 level, than fall significantly. After all, you get paid to hang onto this position, just as I am doing.

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