USD/JPY Forecast: US Dollar Tests Support Level Against Japanese Yen

As the US dollar and Japanese yen continue to interact within this uncertain market environment, the ¥132.50 level is likely to remain a crucial point of interest. 

  • The USD/JPY has retreated slightly during Thursday's trading session, retesting the ¥132.50 level.
  • This area has served as a support level in the past week, having previously functioned as resistance during the currency's upward climb.
  • Market participants are likely to view this level as a key point of interest, providing potential guidance for future moves.

The Bank of Japan's ongoing yield curve control policy remains an important factor influencing the currency pair. By maintaining the 10-year interest rate in Japan at 50 basis points or less, the central bank is required to print yen to purchase bonds. This action increases the supply of yen in the market, resulting in a weaker Japanese currency. Traders will continue to monitor the supply and demand dynamics of the currency pair through the lens of global bond yields. As yields rise worldwide, the Japanese yen will likely face increasing pressure.

The Pair is Expected to Experience Heightened Volatility

Global contagion fears and concerns surrounding the banking system have raised the possibility that central banks worldwide may need to ease their monetary policies. While this speculation has gained traction among some traders, it remains uncertain whether central banks will implement looser policies. Presently, market movements are closely aligned with fluctuations in bond markets, necessitating that traders monitor both to make informed decisions. This trend is observable across all Japanese yen-denominated currency pairs, as these pairs are generally more influenced by the yen's performance than the quote currency.

Notably, the 50-Day Exponential Moving Average (EMA) appears poised to cross below the 200-Day EMA, which could trigger automated trading systems to initiate short positions. In the short term, the currency pair is expected to experience heightened volatility and noise as market participants grapple with shifting interest rate expectations.

As the US dollar and Japanese yen continue to interact within this uncertain market environment, the ¥132.50 level is likely to remain a crucial point of interest. Traders should stay vigilant of global bond yields, central bank policy speculation, and contagion fears to navigate the currency pair's movements effectively. Additionally, the potential crossing of the 50-Day EMA below the 200-Day EMA could signal an upcoming shift in market sentiment, adding another layer of complexity to the current trading landscape.


Ready to trade our daily Forex analysis? We’ve made a list of the best Forex brokers worth trading with.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.