USD/JPY Forecast – US Dollar Continues to See Attempt at Recovery Against Japanese Yen

US Dollar vs Japanese Yen Technical Analysis

The US dollar has risen slightly during the early hours on Monday against the Japanese take advantage of the carry trade again. The Bank of Japan had to walk down some of its hawkishness over the last couple of days as they basically destroyed the Japanese stock market with tightening monetary policy. Japan is one big carry trade and therefore, I think they were a bit shocked at just how vicious the move was around the world. In fact, this unwinding of the carry trade has been massive, and in several markets at one time, causing extreme chaos to say the least.

So, the question now is, are they going to try to save the currency or are they going to try to stabilize the currency? And at this point in time, a tighter Bank of Japan does help the yen, but the interest rate differential is still pretty big. The question now is probably going to fall on the shoulders of the Federal Reserve. If they are very slow to cut, or very slow and steady, it’s possible that we’ll see this pair continue to go higher.

Longer term, I do think that this pair does rally, but it is going to be very noisy in the interim, and therefore you have to be cautious. A move above the 148.50 yen level probably opens up more momentum, but as things stand right now, we’re just bouncing around trying to find some type of bottom.

For a look at all of today’s economic events, check out our economic calendar.