USD/JPY Forecast – US Dollar Finds Buyers After NFP

USD/JPY Forecast Video for 08.05.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has found a bit of buying pressure after the jobs number came out better than anticipated on Friday. By doing so, it reiterates the idea that the Federal Reserve will have to remain tight for longer, which does make this pair more likely than not to continue going higher over the longer term as we have seen so much in the way of tightening from the Federal Reserve, while we have seen a significant amount of quantitative easing coming out of Tokyo.

The Bank of Japan continues to fight rising rates, and will have to do so by purchasing JGBs, specifically the 10 year yield. Because of this, they step into the market and buy more of these bonds, and in the process print more currency. With that being the case, it’s very likely that we continue to see the Japanese Yen suffer at the hands of currencies that have much more aggressive central banks, especially the Federal Reserve. Furthermore, we are approaching the ¥135 level, a psychologically important level that a lot of people will be paying close attention to. If the market can stay above there on a daily close, then it’s very likely that we will continue the overall bullish behavior, reaching toward the ¥138 level above.

The ¥138 level is an area that a lot of people will be paying close attention to as it is the top of the overall consolidation triangle that we are in, which of course is an ascending triangle. A break above that then allows the possibility of a much bigger move. If we can break above that level, then we probably have a much longer term move just waiting to happen. That being said, if we were to turn around and break down below the ¥132.50 level, then the market is likely to see a lot of selling pressure, perhaps opening up a move down to the ¥130 level. I don’t necessarily expect to see that, but it is a possibility if we see some type of sudden turnaround.

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