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

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the Monday session in the early hours, but it’s probably worth noting that the United States itself and Canada are both celebrating Labor Day during the trading session. So, this would have really been more along the lines of half session. Short-term pullbacks should find support though. And I do think that the pair is starting to form some type of bottoming pattern.

After all, the Bank of Japan cannot tighten monetary policy too much because it will absolutely wreck the Japanese economy. Furthermore, the traders on Wall Street had gotten far too ahead of themselves pricing in the idea of rate cuts. So, I do think that you have a situation where we probably need to consolidate or perhaps even bounce significantly to get back to reality. Keep in mind that you get paid to hang on to this pair, and I think that is something that we’re going to see people paying close attention to again rather soon.

While the Federal Reserve is expected to cut in September, inflation in the United States is stickier than once thought, so really at this point I think they will have to stay tighter for longer. I don’t think they are going to tighten monetary policy. I just think they’re going to loosen a little bit and probably do so very slowly. In other words, the carry trade could very well come back, as traders are quick to forget about the latest “thing”, and move onto the next one.

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