USD/JPY Forecast – US Dollar Pulls Back Slightly

USD/JPY Forecast Video for 21.12.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar pulled back just a bit during the trading session on Wednesday as the 200-Day EMA has offered a little bit of resistance. Ultimately, this is a market that I think continues to see a lot of noisy behavior, because we are trying to sort out what central bank to follow. After all, the United States central bank has already discussed that they are going to start possibly cutting rates in 2024, but the Bank of Japan blinked on its chance to normalize rates this week, so it looks like we have two very loose monetary policies competing, and therefore I think you’ve got a situation where although the interest rate differential favors the US dollar, the reality is that people are looking at both of these currencies with a little bit of hesitation.

The 200-Day EMA of course will attract a lot of attention, and it is worth noting that the Tuesday session reached all the way to the ¥145 level. If we can break above the ¥145 level, then it’s likely that the market could go looking to the ¥147.33 level, which is where the 50-Day EMA resides. Underneath, we have a lot of support near the ¥142 level, which is an area we had bounced from before. There’s also an uptrend line in that general vicinity, so I think at this point we are essentially squeezing in this area looking for some type of momentum. All things being equal, Christmas is on Monday, so I think the lack of liquidity will continue to be a major issue as well.

In the end, this is a market that is probably more or less going to be short-term choppy back-and-forth trading just waiting to happen, but if we can break above the ¥145 level, or break down below the ¥142 level, then we could see another leg higher or lower. This will all come down to interest rates, and therefore it’s likely that the traders out there will continue to watch the 10 year yield in the United States and the 10 year JGB in Japan to make their trading decisions.

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