USD/JPY Price Forecast – US dollar continues to rally against Japanese yenThe US dollar rallied during most of the day on Tuesday, reaching towards the ¥112.50 level, an area that of course has attracted attention in the past. I suspect that this point we are churning, perhaps trying to build up the necessary momentum to continue the move higher.
The US dollar went sideways initially during the day on Tuesday, but then struggled near the ¥112.50 level. This is an area that I have been talking about for some time, and at this point I think we are simply digesting some of the gains, perhaps waiting for the next catalyst to move this market higher. I see a significant amount of demand at the ¥112 level underneath, an area that had seen the most recent move to the upside. I think that level will offer significant support, so a bounce from there would be a buying opportunity as well. If we break down below that level, then it’s likely that we could go to the ¥111.25 level where I see even more demand.
Remember that the pair tends to move with the overall risk appetite around the world, but we also have the strengthening US dollar due to the Federal Reserve having several interest rate hikes coming down the road. As long as that is the case, the fundamental analysis for this market should be rather bullish, as the Bank of Japan is stuck with its quantitative easing going forward for at least a year, probably longer than that. Ultimately, I believe that the market should continue to go towards the 113 young level, and then perhaps break out above there and go looking towards the ¥114.50 level, an area where I see a significant amount of resistance as well.