- The USD/JPY demonstrated notable strength during Thursday's trading session, marking a decisive move above the critical 200-day Exponential Moving Average.
- Presently, the next significant hurdle is the 145-yen level, characterized not only by its status as a large, round, and psychologically significant figure but also by the 50-day EMA's proximity, moving swiftly in that direction.
- A successful breach of this level would serve as confirmation of the continuation of the prevailing longer-term trend.
The forthcoming Friday session is expected to provide essential insights into the US dollar's trajectory, as market participants react to the non-farm payroll report. Additionally, keeping a close eye on the 10-year note in the United States is crucial, as it plays a pivotal role in shaping the dynamics of the USD/JPY pair, serving as the most significant secondary market.
The primary driver of this currency pair remains the bond market, with the trajectory of yields in the United States carrying substantial influence. Should US yields continue their ascent, the USD/JPY pair will likely trend higher. Furthermore, it's important to acknowledge that the Bank of Japan has recently affirmed its lack of intention to implement significant policy changes. Consequently, the Japanese yen may be considered somewhat overbought, although the outcome remains uncertain.
The Death of the Dollar? Not So Fast.
Taking all factors into account, it appears that the US dollar is not poised for a dramatic decline against the Japanese yen. Despite claims of a potential Japanese yen recovery by certain major players, the attractiveness of holding US dollars remains a crucial element. Only a breakdown below the 140 yen level would signal a substantial threat to the prevailing trend.
Friday's trading session may exhibit increased activity, with traders adjusting their positions, potentially for the first time this year. Consequently, liquidity concerns may persist, but a return to more normal conditions is anticipated by Monday.
Ultimately, the US dollar's recent performance against the Japanese yen showcased strength, breaking above the 200-day EMA. The next pivotal level is the 145 yen barrier, closely monitored alongside the 50-day EMA. The non-farm payroll report on Friday is expected to provide clarity on the US dollar's short-term trajectory. The bond market, particularly US yields, will continue to be the primary driver, while the Bank of Japan's stance adds another layer of complexity. The underlying sentiment favors holding US dollars, with a breakdown below 140 yen considered a serious threat to the prevailing trend. Expectations of increased activity and liquidity normalization are anticipated by the start of the next trading week.
Ready to trade our Forex daily forecast? We’ve shortlisted the best currency trading platforms in the industry for you.