USD/JPY Price Forecast – US Dollar Rallies into Jackson Hole

The US dollar has rallied a bit during the course of the trading session on Friday, as it looks like traders are trying to get ahead of the Jackson Hole symposium statement coming out of Jerome Powell. After all, people are starting to look at the idea of tapering as strengthening the US dollar, and we are seeing that over here as well. Ultimately, I think this is a market that will continue to see a lot of noisy behavior, but that should not be a huge surprise considering that the pair has been so tightly wound for a while.

USD/JPY Video 30.08.21

A lot of this will come down the bond yields, as the differentiation between the two economies is quite stark. The Japanese have been ultra-loose with their monetary policy for decades, so one would expect more of the same. The Federal Reserve tightening monetary policy by stepping away from bond purchases would of course be very US dollar positive, and we would see that play out here. The market recently has been stuck in a consolidation range though, and that is something that we need to get beyond before we can get remotely aggressive.

The top of the range has been at the ¥110.75 level, and then again at the ¥112 level from a longer-term standpoint. Quite frankly, if we break above the ¥112 level, it is very likely that this becomes a “buy and hold” market. On the other hand, if we were to turn around and fall from here, the ¥109 level would get involved as support, just as the 200 day EMA is sitting underneath there as well.

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