USD/JPY forecast for the week of October 2, 2017, Technical Analysis

The US dollar went back and forth against the Japanese yen during the course of the week, as we hover around the 112.50 level. The market is at an inflection point, and quite frankly wouldn’t be surprise at all to see a pullback a little bit due to the overexertion of the buyers as of late. Longer-term though, I do like buying this pair and I think we go to the 114.50 level above which is the upper bound of consolidation that we have been in for some time. I believe that pullbacks continue to offer buying opportunities, and therefore I don’t have any interest in shorting. I think that the 108 level has held as a bottom in this market, and I look at these dips as value. The US dollar should continue to strengthen against the Japanese yen as the Federal Reserve looks to shrink its balance sheet, while the Bank of Japan still remains very easy overall. On top of that, with interest rates rising in the 10 year bond market, then should continue to support the US dollars well.

If and when we break above the 115 handle, I think that the market is looking for the 117 level next, and then eventually the 120 level. I have no interest in shorting, but I would admit that if we broke down below the 108 level it would be very catastrophic for the US dollar. At that point, I would anticipate that the market would go to the 105 level. Expect volatility, but quite frankly I still believe that the buyers are going to be much more aggressive than the sellers, barring some type of geopolitical issue out of North Korea but even that will be temporary.

USD/JPY Video 02.10.17