USD/JPY Forecast – US Dollar Pulls Back Against Yen on Friday
USD/JPY Forecast Video for 20.03.23
US Dollar vs Japanese Yen Technical Analysis
The US dollar has pulled back a bit against the Japanese yen again on Friday, as we continue to see a lot of movement in the interest rate market. Remember, the Bank of Japan continues to practice yield curve control, and as yields drop around the world, that provides a bit of relief for the Japanese yen, allowing it to strengthen against multiple currencies.
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Against the US dollar, the ¥132.50 level has been support, and it looks as if we are going to continue to see this area protected. After all, we have plunged towards that area a couple of times this week already, and it has found enough buying pressure in that area to keep the market afloat. That being said, it certainly looks as if the sellers are getting somewhat aggressive, so it’s likely that we will see this market try to settle into some type of range in this general vicinity. With that being said, the market will continue to be very noisy, therefore you need to be cautious with any position sizing until we get clarity. The market will of course move back and forth with the overall bond market, and whether or not global rates are rising or falling.
If rates start to rally again, that will put downward pressure on the value of the Japanese yen, but as people run into the bond market due to various credit risks around the world, that tends to drive global rates down, and that allows the yen to continue to appreciate. However, if we see a bond selloff, that will more likely than not send this market back toward the ¥135 level. This is the exact dynamic that we had last year, which caused the US dollar to skyrocket against the Japanese yen.
Looking at the technical analysis, it’s worth noting that the recent bounce that we had seen was from the 50% Fibonacci level, near the ¥127.50 level. Forming a double bottom in that area also gives us a good argument for a floor in the market. In the short term though, it looks like we will remain very volatile and choppy, and therefore it’s likely that the biggest thing you can do to protect yourself is to keep a reasonable position size.
For a look at all of today’s economic events, check out our economic calendar.