- The USD/JPY made an initial attempt at a rally during Thursday's trading session, but later reversed course and approached the ¥142.50 level.
- As we head into Friday's jobs report, the market is expected to experience considerable noise and volatility.
- Despite these short-term fluctuations, the overall interest-rate differential is seen favoring the US dollar, suggesting a continuing uptrend with significant potential for growth.
Traders are advised to closely monitor the upcoming Non-Farm Payroll announcement, which is likely to fuel further volatility until its release. Amidst these fluctuations, an attractive buying opportunity may emerge if a substantial pullback occurs. The 50-Day Exponential Moving Average, currently around the ¥140.55 level, is rising, and it is anticipated to offer dynamic support to the market. Such a scenario would provide investors with the chance to acquire "cheap US dollars."
Traders Should Stay Attentive
Meanwhile, the Bank of Japan has recently exhibited a lenient approach to its monetary policy, despite their attempts last week to lower the market through verbal interventions. Their immediate response this week of purchasing bonds indicates an inclination towards quantitative easing going forward. Given Japan's substantial debt burden, the authorities are cautious about letting interest rates spike too much, as it could adversely impact the economy. Consequently, the Japanese yen is likely to continue depreciating. While the cheap yen benefits the export-dependent Japanese economy, occasional lip service is paid to protect the currency. This mirrors the Federal Reserve's "strong dollar policy," which market participants recognize as more of a rhetorical stance rather than an actual policy.
At the end of the day, the US dollar experienced initial attempts at rallying during Thursday's trading session but faced resistance, edging towards the ¥142.50 level. The market is bracing for upcoming volatility as the Non-Farm Payroll report approaches. Despite these short-term fluctuations, the US dollar is perceived as having a favorable interest-rate differential, supporting a potentially prolonged uptrend. Traders are advised to remain vigilant for potential buying opportunities in the event of significant pullbacks, with the 50-Day EMA providing dynamic support. The Bank of Japan's loose monetary policy is likely to contribute to a weaker yen over time. As the Japanese economy relies on exports, the depreciation of the currency is not necessarily a negative factor, albeit occasional rhetoric about currency protection. Traders should stay attentive to market movements and the impact of economic announcements to navigate through the uncertainty and seize profitable opportunities.
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