USD/JPY Price Forecast – US Dollar Continues to Attempt a Recovery Against the Yen

US Dollar vs Japanese Yen Technical Analysis

The US dollar rallied significantly during the early hours on Wednesday, as it looks like we are trying to get to the 145 yen level. The 145 yen level of course is a large, round, psychologically significant figure and an area that the market will be paying close attention to. If the market were to break above the 145 yen level, then we have to deal with the 50-day EMA which also comes into the picture.

In general, I think this is a situation where short-term pullbacks will continue to be bought into and I do think that we have a scenario where you have to look at whether or not the market is trying to form some type of basing pattern due to a resumption of the carry trade. Remember, the Bank of Japan has recently sat still with its monetary policy, even though the Federal Reserve cut 50 basis points, that still leads the market in an upward trajectory, all things being equal, due to the interest rate differential.

I think that continues to be the main story here and we will have to watch the Federal Reserve very closely to see how out of hand this could or could not get. If we get a daily close below the 140 yen level, then I think the market really starts to fall apart. But in general, to me, it looks like we’re trying to form some type of base. When you zoom out on the charts, you can see that we are most certainly near an area that could be rather supported. You can see that there is a longer term trend line that we have bounced from. So now we’re asking questions about the entire long-term trend. At this point, I’m still inclined to come in and buy dips.

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