USD/JPY Forecast: Reaches the 50-Day EMA

At this point, it’s all about the Japanese yen and interest rates, and necessarily about what people believe when it comes to this currency pair.

• The USD/JPY initially tried to rally during the trading session on Thursday but gave back gains to show signs of hesitation.
• Alternatively, I think we are in an area where we could see a lot of noise, and therefore we could get a little bit of a pullback.
• The 200-Day EMA obviously attracts a lot of attention, so with that being said, I think a pullback makes quite a bit of sense.

The pullback I believe will be a nice buying opportunity for them, and I am more than willing to take advantage of it. The 50-Day EMA is sitting around the ¥133 level, but I think even underneath there we see a huge amount of buying pressure given enough time. The market will continue to be very noisy, which makes quite a bit of sense considering that we have a lot of noise around the Bank of Japan because the central bank has decided to keep a major cap on interest rates, with a 50-basis point limit.

We are during a Major Trend Change

The 50-basis point level will be defended vigorously, and therefore it’s likely that we will continue to see the Bank of Japan be forced to print more currency to keep those yields down. In other words, as soon as we see yields around the world rally, that’s going to put upward pressure on this market. On the other hand, if we turn around and fall, then it’s likely that we could drop down to the ¥130 level.

At this point, it’s all about the Japanese yen and interest rates, and necessarily about what people believe when it comes to this currency pair. You will have to pay attention to the 10-year yield in Japan because that will be a bit of a hint as to what we are going to be doing in this currency pair. The candlestick itself doesn’t tell us a whole lot other than we are struggling a little bit to continue to go to the upside. If we break the top of the candlestick, then it’s possible that we go to that ¥137 level, an area we had broken down from previously to kick off the latest swing low. Nonetheless, I think we have seen enough momentum in the other direction that it’s very possible we are in the midst of a major trend change.

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