USD/JPY Weekly Price Forecast – US Dollar Gives Up Early Gains For the Week

The US dollar has rallied significantly during the course of the trading week, reaching towards the ¥112 level. However, you can see that we have given back almost all of the gains to form a massive shooting star. This obviously is very negative, but at the same time I would also point out that there is a lot of noise underneath here, meaning that there should be a ton of support. The market got ahead of itself, and I think that is really all you can read into this candlestick, at least at the moment.

USD/JPY Video 04.10.21

As long as we can stay above the ¥110 level, then it is likely that there will be buyers willing to buy the dips going forward, and I think that probably is how this plays out. To the upside, the ¥112.50 level is significant resistance, and if we can overcome that level then I think the US dollar is going to continue to skyrocket against the yen. The pair is extraordinarily sensitive to the interest rate differential in the 10 year notes of both countries, so you are probably going to need to see that differential continue to widen in order to make the US dollar much more attractive.

Either way, I have no interest in shorting this market anytime soon, and in fact probably would not do so until we break down below the ¥109 level. I believe that there is a 100 PIP support level between the ¥110 level and the ¥109 level, so that something to keep an eye on.

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