- The US dollar has paused the bid against the Japanese yen, as we have threatened to break out above the most recent high.
- This is a market that I think given enough time will eventually break out.
- We have the job summer coming out on Friday, and that will obviously have a major influence on the pair.
The USD/JPY normally coincides quite nicely with the bond yield differential in the 10 years between the United States and Japan. It continues to blow out, and that should continue to push the US dollar higher. However, a lot of people will be paying close attention to what the jobs number does because it could help signify what the Federal Reserve may have to do going forward. There are still people out their Federal Reserve who will eventually have to back down, and therefore we will continue to see a bit of hesitation.
Japanese Yen Expected to Keep Losing Ground
Furthermore, the ¥140 level continues to be a bit of a barrier, so it’s not a huge surprise to see that we have hesitated. It would not surprise me at all to see a little bit of a pullback, followed by buying pressure. I believe that the ¥136 level entity should offer support, and you will notice on the chart I have a bullish black marked out. That bullish flag measures for a move toward the ¥141 level, and based upon a logarithmic chart, I learned today that 2 standard deviations for the move would be somewhere higher, closer to the ¥147 level! Obviously, I don’t think we get there overnight, but that could be where we end up before it’s all said and done.
The 50 Day EMA is also approaching the ¥136 level, so it does make sense that the market will be paying close attention to that area. If we were to break down below there, then the ¥132 level needs to hold to keep the market healthy and on a nice upward trajectory. I do not think this is a market that you can short anytime soon, and therefore I will be looking at dips as potential buying opportunities to get my hands on “keep US dollars.” Ultimately, the Bank of Japan continues to fight interest rates, therefore we will continue to see the Japanese yen lose ground.
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