USD/JPY Weekly Forecast – US Dollar Bounces After Initial Sell-off for the Week

USD/JPY Forecast Video for 10.04.23

US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar initially fell during the trading week to reach down to the ¥131 level, an area that of course is a large, round, psychologically significant figure and an area where we have seen support multiple times. The market turned right back around to show signs of life, and we ended up forming a hammer-shaped candlestick for the week. That being said, this is a market that has a lot of noise around it, and of course, you have to keep an eye on several moving pieces.

The first thing you need to keep an eye on is the fact that the Bank of Japan has its yield curve control in full effect, meaning that they are willing to print unlimited yen in order to keep the 10-year JGB interest rate at 50 basis points or lower. This is exactly what caused so much trouble for the Japanese last year, but now the rates are starting to fall across the world, and it has released some of that pressure. On the other hand, the Federal Reserve continues to have its hands full as we worry about inflation in the United States, and of course, traders are betting in both directions at the moment as to what the Federal Reserve is going to do. Ultimately, most traders are starting to come around to the idea that the Fed is going to loosen monetary policy, and the Fed Funds Rate is starting to price in an astronomical amount of interest rate cuts later this year. Whether or not that actually happens is a completely different question of course, and the Federal Reserve of course vehemently denies this.

That being said, if we break down below the ¥131 level, then it’s likely that we could go down to the ¥127.50 level, an area that has formed a bit of a double bottom recently. If we were to break down below there, then the market will certainly fall quite drastically from there. On the other hand, if we turn around and take out the ¥134 level, then we could go looking to the ¥136 level, but it would take a bit of effort to get there. I suspect that the next couple of weeks are going to continue to be noisy.

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