USD/JPY Forecast: Trades Range Bound

• The USD/JPY encountered considerable choppiness during Wednesday’s session, remaining confined to a narrow trading range. This price action is not unexpected, considering the recent intervention by the Bank of Japan on Tuesday.
• However, the resulting price fluctuations have been minimal, underscoring the challenges faced by the Bank of Japan in defending the ¥150 level. Over time, it seems increasingly likely that this market will reach that level.
• The primary tool the Bank of Japan has at its disposal to defend the Japanese yen is raising interest rates, a measure currently beyond its reach. In the short term, a pullback in the exchange rate could be anticipated, especially as the market approaches the upcoming jobs report on Friday.

The ¥147.80 level has repeatedly proven its significance as both resistance and support in recent weeks. After the Bank of Japan’s intervention, it played a pivotal role in stabilizing the market. Therefore, it will be intriguing to observe whether the exchange rate might gradually decline to test this level. If the market does reach down to ¥147.80, there is a real possibility of attracting buyers at this key juncture.

Furthermore, the 50-Day Exponential Moving Average is in close proximity, albeit still around 100 pips below the current exchange rate. This moving average could offer technical support, adding another layer of potential defense for the currency pair. It’s essential to emphasize that selling this pair may not be a prudent strategy, as the substantial interest rate differential between the two currencies remains in place, making short positions less appealing.

In the event that the exchange rate manages to break above the ¥150 level, it could set the stage for a potential move towards ¥152. This level represents a recent high in the market and carries a degree of market memory. Ultimately, when examining this market over the longer term, a bias towards a higher trajectory seems plausible.

In conclusion, the US dollar experienced a session marked by choppy price action as it remained confined within a tight trading range. The Bank of Japan’s efforts to defend the ¥150 level face challenges, and a short-term pullback is conceivable ahead of the upcoming jobs report. The ¥147.80 level and the 50-Day EMA could act as potential support zones. Given the existing interest rate differential, short selling this pair appears less justified. A move above ¥150 could open the door to further gains, with ¥152 as a potential target, bearing market significance. In the broader perspective, a long-term upward trajectory seems likely for this market.

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