USD/JPY Price Forecast – Dollar Continues to Wilt Against Yen

The US dollar has rallied just a bit during the trading session to kick off Tuesday, but then sold off rather quickly afterwards. The pair looks as if it is destined to go down to the ¥102 level, which was an area where we had bounced from quite significantly previously. To the upside, I believe that the ¥104 level should be thought of as a potential “ceiling in the market” currently, especially now that the 50 day EMA is sitting just above it. The 50 day EMA has been rather reliable as dynamic resistance, so I think a certain amount of “market memory” is probably built into it.

USD/JPY Video 06.01.2021

At this point in time, I think it is simply a “fade the rally” type of setup that we are still in, just as we have been in for several months now. If we can break down below the ¥102 level, the next target will be the ¥101 level, and then eventually the ¥100 level where I anticipate that the Bank of Japan would start to lose its sense of humor.

In the meantime, I think short-term selling short-term rallies continues to be the best way to handle this pair, as it is very choppy but most certainly has a major downward bias built into it, so I think that is probably the most important thing to pay attention to here, especially as there seems to be quite a bit of stimulus coming out the United States once the new administration takes control. This will be especially true if the Democrats sweeping by winning the Senate as well.

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