USD/JPY Forecast – US Dollar Turns Around

USD/JPY Forecast Video for 17.07.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has initially broken down a bit during the trading session on Friday, only to turn around and show signs of life again at the crucial ¥138 level. The ¥138 level is an area that had previously been resistance and the top of the overall sending triangle. Looking at this chart, it seems like market memory came back into the picture to turn things around and rally toward the 50-Day EMA. It’s also worth noting that the market is at the bottom of the overall bullish flag that I had marked on the chart, and therefore a lot of market memory is sitting in this area, perhaps willing to offer a bit of support.

If the market were to break down below the bottom of the candlestick on Friday, then it’s possible that we could see the US dollar drop down to the 200-Day EMA, closer to the ¥136.50 level. That being said, I think it’s probably unlikely to see that happen, because the market had fallen so hard. All things being equal, this is a scenario where we are seeing a lot of market memory come into the picture and therefore we could see a potential trade set up. If we can break above the 50-Day EMA we would have a bit of confirmation, but some traders will be jumping into this market as it takes out the top of an inverted candlestick from the previous session.

Keep in mind that the interest-rate differential continues to be very wide, and therefore we probably have further upward momentum over the longer term. Recently, the Bank of Japan has suggested that they were going to tweak yield curve control, so that has been part of the ranch and that we have seen. That being said, the inflation numbers have also come in a little cooler than anticipated recently, at least in the United States, so that has had an effect on the US dollar. In general, this is a situation where I think traders are trying to come back in and pick up “cheap US dollars”, or at least take profit in the Japanese yen, which of course has been like a punching bag for quite some time.

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