USD/JPY Forecast – US Dollar Continues to Drop Against The Yen

US Dollar vs Japanese Yen Technical Analysis

The US dollar has fallen rather significantly during the early hours on Monday against the Japanese yen, but we are trying to stabilize a bit. Because of this, I think the people around the markets are still looking at the area near the 146 yen region as an area that we could continue to see a lot of people trying to jump in and take advantage of the longer term carry trade outlook.

That being said, we continue to see a lot of very noisy behavior. And therefore, I think you’ve got a situation where traders see this through the prism of will the Bank of Japan continue to tighten monetary policy and possibly wreck the Nikkei 225 in the process as well as the Japanese economy or will they back off?

At this point I think it’s obvious that if we can get above the 150 yen level a lot of people will jump back into this market based on FOMO. On the other hand, if we break down below the 144 yen level, then the market is likely to break down rather significantly. This has been a horrific fall in this pair, but sooner or later traders will continue to look at that interest rate differential despite the fact that the Fed is likely to cut. It is still a mile wide, and therefore a lot of traders might be tempted to take advantage of it if and when they get the opportunity to “buy cheap dollars against the yen.”

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