- The US dollar continues to drop against the Japanese yen, as the interest rate differential starts to narrow.
- That being said, there are a lot of questions to ask about whether or not the Japanese will have to continue to fight inflation.
- While inflation is a relatively new thing in Japan, the reality is that we have a long way to go before the interest rate differential makes it viable to short this pair for any length of time. After all, you will be paying for the privilege of owning Japanese yen, and therefore I don’t think that’s a very viable trade for a longer-term move.
However, it’s probably worth noting that there’s no real reason to jump in and start buying quite yet. It’s also worth noting that the Non-Farm Payroll announcement comes out on Friday, and that tends to be very influential for what happens with the USD/JPY pair. Ultimately, I do believe that we are at a point of reckoning, in the next couple of days should end up telling the story overall.
Technical Analysis
Top Regulated Brokers
The technical analysis for this pair is starting to get negative, as we have seen such massive selling pressure. We are quite there yet, despite the fact that we did drift below the 200 Day EMA. I suspect that by the end of the day on Friday, we might know where everything is heading. We could see the entire narrative get flipped on its head, were people are buying dollars and yen against other currencies but perhaps favoring the yen overall. In other words, it could be a big run to safety for all we know.
On the other hand, if we were to turn around and rally, taking out the top of the candlestick for the trading session on Thursday, that might signal the beginning of the end of the correction. While this has been a brutal sell off, the reality is that we are nowhere near making a “new lower low”, so we are still in a bit of a state of flux at the moment.
Want to trade our USD/JPY forex analysis and predictions? Here's a list of forex brokers in Japan to check out.