- The USD/JPY has rallied significantly during trading on Thursday as we wait for the Non-Farm Payroll number on Friday.
- The pair is now threatening the ¥140 level, and it looks as if we are ready to go much higher over the longer term.
- The market is likely to see a little bit of a pullback, and it’s likely that we will see an opportunity to pick up some value.
- We have made a “higher high”, so that of course in and of itself is a very bullish sign.
However, we are heading into a 3-day weekend in the United States, and therefore it would make quite a bit of sense that we may see a short-term pullback before we turn around and continue to go higher. The 50-Day EMA is near the ¥136 level and could offer a bit of support in this market. I don’t think we get anywhere near there. Even if we did, I would look at that as a nice buying opportunity. At this point, I anticipate that we may get a little bit of a drift lower, and then the jobs number will have a major influence on where we go next.
Japanese Yen Likely to Keep Losing Ground
The market breaking down below the 50-Day EMA then would open the possibility of a move down to the ¥132 level, which is where we have seen a bit of a “double bottom.” Keep in mind that the Bank of Japan continues to fight against higher interest rates, therefore it does make quite a bit since the Japanese yen will continue to get pummeled as they are essentially “printing unlimited yen.” This makes the supply/demand dynamic obviously favor the US dollar, and with the Federal Reserve doing everything it can to fight inflation, it means that we will continue to see tight monetary policy coming out of the US.
This essentially makes this a “perfect setup”, for the market to go much higher over the longer term. I have no interest in shorting this pair and look at any pullback as an opportunity. Longer term, it’s very likely that the Japanese yen will trade at ¥145 against the greenback. The only thing that can save the yen now he’s going to be if the Federal Reserve change this policy, or the Bank of Japan does.
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