The US dollar has rallied again during the day on Friday as we continue to see the USD/JPY pair rally rather significantly. We broke above the ¥137 level at one point during the day on Friday but gave back a bit of the gain as this is an area that’s been focused on previously and offered a certain amount of downward pressure then. Looking at this chart, it’s obvious that we are getting just a little bit extended, but I think the trend is still very bullish.

The 50 Day EMA sits at the ¥134 level and should continue to attract a lot of attention in and of itself. Even if we break down below there, then the ¥132 level is an area where you would expect to see a lot of support also. This is a market that I think continues to see a major move to the upside given enough time, but this will also be dependent on the bond markets in general. After all, the interest rate differential between the 2 countries continues to be quite wide, and therefore it makes quite a bit of sense that people would favor the greenback.

Is USD/JPY a good pair to trade now?

On the upside, the ¥140 level is an area where you would expect to see a bit of psychological resistance, and it looks like we are going to try to get there eventually. If we break above that level, then obviously that would be a very bullish sign. The US dollar has gotten quite strong over the last couple of days, so it’s not a surprise to see it do the same thing over here.

The Bank of Japan continues to work against interest rates and that country, trying to keep the 10-year yield at 0.25% or below. They are essentially “printing currency” every time they buy bonds, and therefore it makes sense that more supply would be negative for the value of the Japanese currency.

• The US dollar is the favored currency around the world, while the Japanese yen is one of the least wanted.
• This is essentially the “perfect storm” for market conditions as they stand right now.
• It’s not until we break down below the ¥130 level that I would be concerned about the overall trend in this pair.

Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex brokers in the industry for you.

If we break down below the ¥101 level, that could be a major turnaround just waiting to happen.

The Canadian dollar has rallied a bit during the trading session on Wednesday to show signs of life again, as we are now threatening the ¥105 level. Furthermore, the 50-Day EMA is sitting right around the same level as well, so I think it’s probably only a matter of time before we see a bit of a fight on our hands.

Factors to Keep in Mind

• The oil markets because we do see some type of recovery in the oil markets, which obviously helps the Canadian dollar.
• Most of the effort in this market will probably come from the Japanese side of the equation.
• The Bank of Japan continues to fight to keep the 10-year yield in that country down to 0.25%, which is a Herculean effort, to say the least as interest rates around the world have been rising.

In fact, Japan has seen inflation for most of this year, which is the first time in years. Because of this, the Bank of Japan has to step in and continue to buy “unlimited bonds” in order to keep the bench right where it wanted. That’s tantamount to printing “unlimited yen”, which obviously increases the supply of that currency in the markets. If the interest rates around the world continue to rise, the Japanese yen will continue to take it on the chain, which is what we have seen everywhere, not just against the Canadian dollar.

Ultimately, we are in an uptrend, and now the question is whether or not we can break significantly above the ¥105 level. If we cannot, it’s more likely than not that we are going to see a sideways type of market, with the ¥102 level underneath offering support, as we banged around and tried to work off some of the froth. If we break down below the ¥101 level, that could be a major turnaround just waiting to happen. A lot of this is going to come down to the overall yields in bonds, not just these 2 countries. Because of that, you need to keep a broad-based perspective on yields.

Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex brokers to check out.

As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late.

• The US dollar pulled back a bit against the Japanese yen in early Monday morning trading only to turn around and show signs of support.
• By doing so, the USD/JPY currency pair looks very likely to continue going back and forth, with the ¥133 area offering a bit of support.
• In fact, the ¥132.50 level seems to be even more remarkable when it comes to buying pressure, so I think we are essentially “stuck in this area” for the time being.

USD/JPY Technical Analysis

Ultimately, the 50-day EMA sits above the crucial ¥135.50 level, and I think will continue to offer a little bit of a technical barrier. Because of this, I will be looking at that as a gateway to much higher pricing, and if the US dollar can climb above that level, it’s very likely that this market would continue to see quite a bit of bullish pressure. Ultimately, the dollar could go looking toward the ¥140 level, which is an area that I think offers psychological and structural resistance based on historical charts.

On the other side of the equation, if we were to break down below the ¥132.50 level, we could go looking all the way down to the ¥127 level for support. I would also anticipate that the ¥130 level will at least be of psychological importance, so we could see noise in that vicinity as well. I do believe that given enough time, this is a market that continues to be very noisy to say the least, so you have to be cautious about your position sizing, but it’s obvious that it’s going to be much easier to go to the uptside than to the down, as it is with the longer timeframe trend.

The interest rate differential in the United States continues to favor the greenback over the yen, but if it appears that the Federal Reserve will have to be a little bit looser with its monetary policy than once anticipated, that could put downward pressure on this market. As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late. In other words, the old correlations still remain, and it makes a certain amount of sense that we would see this play out in the same way.

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

If yields around the world start rising, that’s an excellent buying opportunity in this market, and of course vice versa as we have seen this correlation play out for a while.

• The US dollar rallied during the Friday session to show signs of life again against the Japanese yen.
• The longer-term uptrend has been very strong, so it does make quite a bit of sense that we would see this area offer buyers given enough time.
• Overall, the USD/JPY currency pair will continue to pay close attention to the ¥132 level as potential support, but it’s also worth noting that we have been noisy over the last week or so.

When you look at this chart, you can see that we have shown a bit of a pullback as of late, but we had been a little overdone, and that’s part of a normal market. With the Bank of Japan continuing to print unlimited yen, via buying unlimited bonds, that does put a certain amount of downward pressure on the Japanese currency. However, if interest rates around the world are going to continue to fall, that releases some of that pressure on the Japanese, and thereby makes the Japanese yen strengthen.

Watch the Bond Markets

In other words, you need to pay close attention to the bond markets worldwide to get an idea as to how the Japanese yen may perform. If yields are dropping around the world, then it’s possible that we could see the Japanese yen strengthen. However, if we see a spike in rates, then it’s likely that the Japanese yen gets sold off quite drastically. In that scenario, we will probably look towards the 50-day EMA, which is just below the ¥136 level. If we can break above there, then it’s likely that the market then would perhaps try to make a move to the ¥140 level.

It’s almost impossible to trade this market without paying close attention to the 10-year yields worldwide, so I would have the chart open for the United States, Japan, Germany, and the United Kingdom. If yields around the world start rising, that’s an excellent buying opportunity in this market, and of course vice versa as we have seen this correlation play out for a while. I don’t think that will change any time soon, so as long as you keep an eye on all of these markets combined, it should give you a clear roadmap as to where we go next. Expect volatility, but expect that correlation.

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

As long as we stay above the ¥132.50 level, not much is changed, and it looks bullish.

• The US dollar initially fell during the trading session on Thursday but found the support level that I had been talking about previously as reason enough to get long.
• The ¥132.50 level has held firm, and now it looks as if the USD/JPY currency pair is trying to go higher again.
• Keep in mind that this pair has been almost solely driven by interest rates, so you will need to keep an eye on the bond markets.

The US dollar has seen interest rates in America drop a bit, which of course has been negative for the greenback. However, we have also seen a little bit of stabilization, and that has helped the Japanese yen. The reason for that is that the Bank of Japan continues to defend the quarter percent peg on the 10-year bond, meaning that if interest rates start rising everywhere, that means that there is a bit of a “knock-on effect” in the Japanese bond market. Looking at this chart, you can see that we had been in a long-term uptrend and as the interest rates in America had been rising, we had seen the Japanese have to print more yen. This has been a perfect setup for this trade, and now it looks like we may continue to see that.

The 50 Day EMA sits above the highs from the trading session on Wednesday, so if we were to break above there, then it’s possible that we could see a bit more bullish pressure at that point as the market would start to see it as momentum building up. At that point, the market is likely to test the highs again, and perhaps even further. I think the ¥140 level could be a possibility, but it probably is going to take a significant amount of momentum to make that happen. I would anticipate a lot of noise, and therefore you will have to be very cautious about your position size. Ultimately, as long as we stay above the ¥132.50 level, not much is changed, and it looks bullish. If we break down below there, then we could be looking at a move all the way down to the ¥127.50 level. Either way, you will have to keep an eye on the bond markets, and interest rates as to where they are going.

Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers to choose from.

This is a market that has been noisy, but reliably positive. 

• The USD/JPY currency pair rallied significantly Friday to break above the ¥135 level.
• A lot of this has come down to the fact that the interest rates in America spiked after the jobs number came up much stronger than anticipated.
• Keep in mind that a lot of questions are being asked about whether or not the Fed is going to have to continue tightening or not, and by the end of the day on Friday it seemed that consensus has shifted from a potential 50 basis points in September to the possibility of 75.

Buyers to Come in On Dips

Looking at this chart, it’s obvious that we have a lot of the interest rate differential pricing, but at the same time, we have the Bank of Japan doing everything it can to keep interest rates down to 0.25% on the 10-year JGB. Because of this, the Bank of Japan continues to have to buy unlimited bonds, which is the same thing as printing unlimited yen. Because of this, the market is quite likely to see buyers coming in on dips, due to the fact that the Japanese are doing everything they can to keep those rates down. On the other side of the equation, you have the Federal Reserve which is in the process of tightening monetary policy. In other words, it sets up a “perfect storm” for a continuation.

Underneath, the ¥132 level is an area where you would expect to see support, just as we had previously. If we break it down through there, then the ¥128 level began significant support going forward, possibly being trend-defining level as well. Ultimately, it’s worth noting that we are breaking above the 50-day EMA as well, as it is an area that a lot of technical traders pay close attention to.

If we can continue going higher, it’s very likely that the markets will find plenty of reason to test the highs again. Quite frankly, this is a market that has been noisy, but reliably positive. The action that we had seen during the session on Friday should continue to add credence to the idea of this pair continuing to climb over the longer term. Breaking above the ¥140 level could be a huge deal going forward, allowing for more of a “buy-and-hold” scenario.

Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex trading brokers in the industry for you.

I think you have a lot of noise ahead of you, so you are going to need to be very cautious with your position sizing.

• The US dollar fell again against the Japanese yen on Monday as we continue to see a lot of problems out there.
• Ultimately, this is a market that I think given enough time we will have to find some type of stability, or we will break down rather drastically.
• The market is likely to continue being noisy in general, as we have a lot of different things going on at the same time.

Expect Buyers

The US dollar has dropped down to the ¥132 level, an area that is the beginning of a significant area of “market memory” that we will be paying attention to from both sides. Ultimately, this is a market that is paying close attention to the Bank of Japan, and what it is doing with its interest rates. Furthermore, interest rates in the United States have been falling, so at the same time, it looks as if the Bank of Japan will have to do a lot less quantitative easing, at least in this environment. This is part of why the Japanese yen has strengthened. That being said, the market was also overbought, so a little bit of a pullback does make quite a bit of sense. With this being the case, I think you are more likely than not going to see buyers jumping in sooner or later, and we are at the first major support region.

If we do break down from here, the next major support level is closer to the ¥127.50 level. That is an area where we have seen a lot of buying pressure previously, so I think it makes quite a bit of sense that “market memory” comes into play. Breaking down below that level could open up a significant selloff, sending this market much lower. At that point in time, I would assume that the uptrend is over. On the other hand, if we turn around and bounce at one of these levels, it’s very possible that we could continue to go much higher. Either way, I think you have a lot of noise ahead of you, so you are going to need to be very cautious with your position sizing. We do not have a set up to start buying quite yet, so I am essentially sitting on my hands at the moment.

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

I will be looking for this market to show signs of a bounce, and then will get long again.

The USD/JPY pair initially rallied Wednesday but gave back gains to show signs of hesitation. That being said, we are still very much in the same up-trending channel that we have been in for a while, and I think we have a scenario where the market will give us plenty of opportunities occasionally. The market dipping gives us an opportunity to pick out the US dollar against the Japanese yen which is the epitome of central-bank divergence at the moment.

It’s worth noting the 50 Day EMA sits below near the ¥133.50 level and is rising to meet the bottom of the up trending channel. This could end up being a buying opportunity, but we will have to wait and see whether or not the buyers return. I would be very cautious, but it is worth noting that the interest rate differential between the United States and Japan continues to widen, as the Federal Reserve raised interest rate 75 basis points. I think given enough time, this is a market that will take off to the upside and not look into the ¥140 level.

On the downside, if we were to break through the bottom of the up trending channel, we could test the 50 day EMA, which is an area that I think is worth paying close attention to as a lot of traders like that as a dynamic support level. Because of this, that could be where the market pulls back to before the buyers combine, and even after that, we have the possibility of a move down to the ¥128 level. That’s an area that I think would see a lot of interest as we had bounced from there previously. Anything below there then changes the trend.

As things stand right now, it’s likely to remain a “buy on the dip” market, just as we have seen over the last several months. Until something changes fundamentally from either central bank, I believe that is difficult to get short of this market, and you have to follow the trend. Trends like this don’t and overnight, so I would anticipate plenty of momentum still be a major part of what we are seeing here. Because of this, I will be looking for this market to show signs of a bounce, and then will get long again.

Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers to choose from.

Keep in mind that the crude oil markets have a major influence on this currency pair as the Canadian dollar is a proxy for that market for currency traders. 

• The Canadian dollar initially fell quite drastically against the Japanese yen as former Japanese Prime Minister Shinzo Abe was assassinated.
• While a tragedy, the reality is that it has absolutely nothing to do with the present situation in the Japanese economy.
• The market ended up rallying quite stringently, as the Japanese yen was sold off against almost everything. 

Impact of BoJ and Crude Oil

The Bank of Japan continues to buy unlimited bonds, and that has a negative effect on the currency as it is essentially the same thing as quantitative easing, or “printing yen.” Because of this, it makes quite a bit of sense that we would see this market continue to be more or less a “buy on the dips” type of situation, as we continue to try to find value. The ¥106 level is an area that was resistant previously, but it looks like we are becoming more and more aggressive on the breakout possibilities.

If we do break above the ¥106 level, then I think we have much further to go. Keep in mind that this is a strong uptrend and has been for a while. In fact, you can make an argument that this pair is quite a bit more sustainable than many of the other yen-related pairs, as it has not been quite as parabolic. On the other side of the equation, you have to keep in mind that the crude oil markets have a major influence on this currency pair as the Canadian dollar is a proxy for that market for currency traders. If crude oil rises, just as it did during the day, as a general rule this pair will rise right along with it as Japan imports 100% of its petroleum from foreign sources.

If we were to turn on a breakdown below the ¥102 level, that might cause a bit of a reset in this pair, perhaps even driving the CAD/JPY pair down to the ¥98 level, where would meet up with the 200-day EMA. The market breaking down below that indicator would be very negative, and would signify a trend change. However, it looks very unlikely at the moment.

It certainly looks as if we are going to go higher than lower.

• The Canadian dollar initially fell on Wednesday to reach down toward the ¥104 level.
• The ¥104 level is an area that has been previous support, soit’s not a huge surprise to see this market turnaround and show signs of life.
• In fact, by the end of the day, the pair ended up forming a bit of a hammer, which is telling considering that the crude oil market recovered quite nicely as well.

The 50-day EMA is at the ¥103 area and rising, and because of this, it’s very likely that we continue to see more of a “buy on the dips” type of attitude. This is especially true considering that the Bank of Japan is doing everything it can to work against rising yields, thereby essentially buying as many bonds as it takes. That is the same thing as printing currency hand over fist, so we should continue to see the Japanese yen suffer as a result.

Pay Attention to Crude Oil

However, you should keep in mind that the Canadian dollar is highly levered to the crude oil markets, so pay attention to how they are behaving to get a feel for how the Canadian dollar will do. In other words, if the crude oil market recovers, then it’s likely that we would see the pair do quite well. However, if oil takes a bit of a dip, it could either turn this market around and make a breakdown, or it may work against the upward momentum.

This looks like a market that is trying to do everything it can to show signs of life, and I think we continue to consolidate back and forth. The 50-day EMA might be reason enough for people to get long, but really at this point, I think what we are seeing is the market trying to chip away at the ¥106 level. The attitude of the market remains very noisy, so you should be very cautious about your position size. Regardless, it certainly looks as if we are going to go higher than lower. However, if we were to break down below the ¥100 level, that could change a lot of things as it would almost certainly have a certain amount of psychology working as well.