Dollar has a Pullback Against Yen

Given the recent turnaround in the pair and the support at the 50% Fibonacci level of the massive move from last year, it is possible that the exchange rate could move higher eventually. 

The USD/JPY has shown some weakness against the Japanese yen during Thursday’s trading session, solidifying the idea of the ¥137.50-¥138 level being a significant resistance barrier. This level has seen a lot of resistance previously, and breaking above it could lead to quick gains.

One factor that could impact the yen’s exchange rate is the Bank of Japan’s yield curve control policy. The central bank has been committed to keeping the 10-year yield below 50 basis points, which requires printing yen to buy Japanese bonds. This puts downward pressure on the currency’s value, which could limit its strength in the forex market.

On the other hand, Jerome Powell’s testimony in front of Congress has reiterated the Federal Reserve’s desire to keep interest rates tight and potentially speed up the process. This could drive the value of the dollar higher, and it won’t happen in a vacuum. This means that the yen’s weakness could be compounded by the strength of the dollar, creating further downward pressure on the exchange rate.

• Looking at the chart, the ¥135 level underneath could be the next major support level. Additionally, we recently saw the 50-Day EMA break above the 200-Day EMA, forming the so-called “golden cross.”
• This could be interpreted by longer-term traders as a signal to buy and hold the asset.
• While its effectiveness as a lagging indicator remains to be seen, it is worth noting as a potential factor in the market’s movements.

Given the recent turnaround in the pair and the support at the 50% Fibonacci level of the massive move from last year, it is possible that the exchange rate could move higher eventually. As long as the central banks in Japan and the US maintain their current policies, there are fundamental reasons to believe that this pair will continue to rise.

While short-term pullbacks are expected, they could provide buying opportunities for traders. Overall, the market remains dynamic and subject to multiple factors, including central bank policies, global economic conditions, and risk sentiment. News flow continues to be a major factor in the market at the moment, as there is so much uncertainty. Because of this, you need to pay close attention to any breaking news that comes out, but also recognize that as long as the Bank of Japan continues its yield curve control, the Japanese yen will probably continue to get sold off over the longer term.