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

US Dollar vs Japanese Yen Technical Analysis

The US dollar rallied rather significantly during the early hours on Thursday as we are threatening the 149 yen level. This is a market that has jumped back over a trend line that had been so important previously and had been a little bit resistant on the way back up. Retail sales in the United States came out much hotter than anticipated. In fact, it came out four times what was anticipated. Unemployment claims are still lower than anticipated, and some of the other economic numbers were a bit better than anticipated also.

So, with all of that being said, it’s interesting how the ball might be back in the court of the Bank of Japan as they have to deal with the idea of whether or not they are going to continue to fight the depreciation of the yen. Remember, even if the Federal Reserve cuts interest rates, we’re looking at a difference between the United States and Japan, that is still something along the lines of 4.75% interest rate differential, maybe 4.5 if the Fed gets aggressive. In other words, you still get paid to hold this pair, and I think that’s going to be a big driver longer term.

If we can clear the 150 yen level, that will almost certainly bring in more buyers and could in fact kick off the overall “carry trade” around the world. The markets are certainly missing the ability to get paid at the end of each session, so I think we are starting to see the markets “dip their toes back into the water.”

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