USD/JPY Forecast Video for 12.06.23
US Dollar vs Japanese Yen Technical Analysis
The US dollar rallied a bit during the trading session on Friday, showing signs of life yet again. That being said, we are currently consolidating in a back-and-forth tight range, as the market is trying to build up enough momentum to break out above the ¥140 level, an area that is obviously a large, round, psychologically important number. If we get above there, then the market is likely to go much higher, perhaps reaching the ¥142.50 level, maybe even the ¥145 level. Ultimately, I do think that is more likely than not, due to the fact that the Federal Reserve remains tight, and the Bank of Japan continues to wrestle with that yield curve control policy. As long as that’s going to be the case, people get paid to hold dollars against the yen via swap, so it sets up the old-fashioned “carry trade.”
Underneath, the ¥138 level will be an area of support based upon the fact that we have seen resistance there previously. With that being the case, I think it’s probably only a matter of time before the buyers come back to take advantage of “cheap dollars.” That being said, this is a very noisy market, and that of course is a major problem for trading this market. That being said, I think if you hang on to the trade, you need to be position sized correctly.
After all, the market is likely to continue to be noisy as this pair is noisy under the best of circumstances, but quite frankly the market is likely to pay close attention to comments coming out of the Federal Reserve next week, and that of course makes a huge difference as well. If the Federal Reserve continues to flex its muscles, it’s very likely that we would see this pair shoot straight up in the air. You can make an argument that we are in the midst of a bullish flag, so that of course is also another reason to get bullish at this pair as well from a technical analysis standpoint.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire