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

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied slightly against the Japanese Yen, although it has given up some of its gains in the early end of the week on Tuesday. Looking at this chart from a longer term perspective, there was a trend line broken. We did rally to test it early on Tuesday, but then it looks as if we failed just below it. So, we’ll have to wait and see whether or not we can pick up any momentum. I think at this point in time, a break above the 147.50 level could be a signal that we are going to in fact recover.

On the other hand, if we break down below the 143 yen level, then we probably continue to see downward pressure. In general, this is a market that has been brutally sold off due to the carry trade unwind. And if the carry trade continues to get unwound, there’s no real hope for it. Keep in mind that the Bank of Japan did raise rates recently, but we’ve already seen chaos because of that. So, the question then becomes, how long can they enter a tightening cycle, are they willing to blow up the global economy?

I don’t think so. So, I suspect sooner or later, we are going to have people stepping in to buy this pair, but right now we’re still in that bottoming process. And considering that going back to the highs again, would be a move all the way to 162, you’ve got time. You don’t have to be a hero and be the first one in. Let’s see how this behaves in the next day or two.

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