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USD/JPY Price Forecast – US dollar choppy against yen

By:
Christopher Lewis
Updated: Jul 17, 2018, 04:47 UTC

The US dollar has initially gapped lower to open the week, but then rally towards the 112.50 level before dropping a bit. This is a market that looks a bit overstretched at this point, so I believe we need to pullback in order to pick up more upward momentum.

USD/JPY daily chart, July 17, 2018

The US dollar has gapped lower to start out the week, but then broke through the gap and slammed into the ¥112.50 level. That’s an area that has been crucial more than once, and I think that this area will continue to be important. I believe longer-term attitudes of this market remain bullish, mainly due to the interest rate differential between the United States and the Japanese. After all, we already know that there are a couple of interest rate hikes coming down the road for the Federal Reserve, while the Bank of Japan needs to worry about an inverted interest rate curve, keeping monetary policy loose in Japan for at least another year.

With a nice interest rate differential like that, it does put upward pressure on this market. However, keep in mind that there is a certain amount of risk appetite that comes along with this pair, and therefore we could get the occasional pullback based upon concern around the world. Given enough time, the market should go higher though, and I look at pullbacks as an opportunity to pick up value in a market that seems to have a lot of momentum overall. I believe that the market continues to see this market as one that if you are patient enough should offer a nice long-term play. Overall, the ¥111.25 level underneath should be the “floor” in the market, although I do see a certain amount of demand at the ¥112 level.

USD/JPY Video 17.07.18

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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