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

US Dollar vs Japanese Yen Technical Analysis

The U.S. dollar has pulled back just a bit during the early hours on Tuesday but has turned around and shown itself to be somewhat positive. At this point in time, I still watch the 200 day EMA above as a major resistance barrier. And then after that, we have the 150 yen level, which will have a lot of psychology attached to it. In fact, if we can break above the 150 yen level, I think that’s a very strong sign. Keep in mind this market had shot straight up in the air and then over the last couple of days, has pulled back just a bit and therefore, it’s not overly surprising that value hunters have come back in.

Also keep in mind that the 50 day EMA sits underneath and will almost certainly offer support. And when you find yourself between the 50 day EMA and the 200 day EMA, a lot of time there is a bit of compression there. Generally speaking, you launch from those areas one way or the other. So as long as we can stay above the 50 day EMA, I still lean to the upside.

The interest rate differential continues to favor the US dollar, and even if the Federal Reserve does end up cutting again by probably 25 basis points, it is still a massive interest rate differential. So, in other words, in summary, I think the carry trade is coming back. The Bank of Japan has recently admitted they cannot tighten monetary policy any further, so I suspect it is only a matter of time before we take off.

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