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

US Dollar vs Japanese Yen Technical Analysis

The US dollar has stabilized a bit in the early hours on Thursday against the Japanese yen as we continue to hang around the 142 yen level. This is an area that’s been important multiple times, so it’s not a huge surprise to see that it has come back into the psyche of the market. The question now is whether or not the hammer that we formed on Wednesday leads to gains on Thursday, but so far it has been slightly positive.

We get the PPI number, so that of course will have its own influence, but ultimately the market seemingly is okay with the idea of inflation still being a little bit sticky, so we’ll have to wait and see. But the 18th features the Federal Reserve interest rate decision, which should be a 25 basis point cut. And at this point, I think it’s pretty obvious that has been priced into the market in spades, as it were.

The question now is what will the Bank of Japan do just two days later? I think they are somewhat limited in their ability to hike rates, so the interest rate differential should continue to favor the US dollar, and I do think that sooner or later that will attract inflows.

If we can break above the 145 yen level above, then we could really start to take off, but right now it looks like we’re doing the thing that we need to do to get things turned around initially, and that’s just simply stop falling. If we were to break down below the 141 yen level, it would be an extraordinarily negative turn of events, perhaps opening up a trap door, as if it were in this pair, allowing it to drop much farther.

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