USD/JPY Forecast – US Dollar Finds Buyers On the Dip

USD/JPY Forecast Video for 07.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has pulled back a bit early during the trading session on Monday but found enough buyers underneath to turn things around and continue the recovery against the Japanese yen. This makes a lot of sense as the Bank of Japan continues to defend the 50 basis point level on the 10 year note in that country. That being said, the market is likely to continue to see more upward trajectory than anything else. However, there is a significant amount of resistance just above, near the ¥137.50 level.

Underneath, we have the ¥135 level offering support, and we also have seen a lot of action there previously. That at one point was both support and resistance, meaning that there should be a lot of “market memory” in that general vicinity. Beyond that, we also have the 50-Day EMA trying to cross back above the 200-Day EMA to form the “golden cross.” This is an indicator that a lot of longer-term “buy-and-hold” traders will pay a lot of attention to, therefore it’s likely that the traders will continue to see a lot of reasons to go higher, and if we can break above that ¥137.50 level, then we could go looking to the ¥150 level.

Another thing to pay close attention to is the fact that we recently formed a “double bottom near the ¥127.50 level, which of course was the 50% Fibonacci level from the massive move higher that we had seen last year. Considering that the central bank situation has not changed, the reality is that it makes a lot of sense that we will go back to last year’s trade.

However, I don’t essentially think it happens as quickly, but it is worth noting that the interest rate market in America continues to show higher yields, and the so-called “carry trade” makes quite a bit of sense in this particular case, and not only do you see it against the US dollar, but also many other currencies around the world as the Bank of Japan is the only major central bank around the world that is in a quantitative easing monetary policy, and therefore the interest rate differential will continue to favor other currencies.

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