USD/JPY Forecast – US Dollar Flexes Its Muscles on Thursday

USD/JPY Forecast Video for 05-01-2024

US Dollar vs Japanese Yen Technical Analysis

You can see it’s been a very stout and strong trading session here on Thursday as the US dollar has broken above the crucial 200 day EMA. At this point, the next barrier will be the 145 yen level, which also not only is a large, round, psychologically significant figure, but it’s an area where the 50-day EMA is racing toward. Breaking above there would confirm a continuation of the longer-term trend. I suspect we will probably get a lot of information on Friday as to what the dollar’s going to do, as the reaction to the non-farm payroll number will give us quite a bit of clarity. Pay attention to the 10 year note in America, that tends to be the most important secondary market when it comes to the USD/JPY pair.

The bond market of course is going to be the big driver and if yields continue to grind higher in the United States, it’s very likely that this pair goes higher. Furthermore, you have to keep in mind that the Bank of Japan has recently admitted that it’s not going to be doing anything major and therefore the Japanese yen might be a little overbought. We’ll have to wait and see, but at best it looks like the Japanese may go to a neutral rate, not a positive one. Because of this, I think the US dollar is not necessarily going to melt down against the Japanese yen, despite the fact that there are some big players out there pushing the idea of the Japanese yen recovering during most of the year.

So, with all things being equal, we still get paid to hold dollars and therefore I think over the long term that remains the most important factor. It’s not until we break down below the 140 yen level that I think this trend is in serious trouble. That being said, Friday could be noisy as traders move in and out of position sometimes for the first time in the entire year. So, liquidity issues remain. On Monday, we should start to see a little bit more normalization when it comes to that.

I believe that if we can break above the ¥145 region, this is a market that could start to take out to the upside, but we need to see that momentum reenter the pair. At this point, we have made a significant bounce, but follow-through will be crucial.

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