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USD/JPY Forecast: Working Off Froth Against Japanese Yen – 11 May 2022

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The uptrend is a bit stretched, but there is nothing on this chart that says we are in imminent danger of turning things around.

The US dollar did very little to inspire a lot of trading on Tuesday, as most of the market is waiting on the Consumer Price Index numbers from America on Wednesday. It is a major inflationary announcement, which of course is front and center for most traders right now. Because of this, the market looks as if it is likely to wait until that announcement is released to make a meaningful reaction.

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The yen is a popular asset during turbulent times.

If the inflationary numbers are hotter than anticipated, the US dollar will likely strengthen against not only the Japanese yen but probably almost everything during the day. On the other hand, if the CPI numbers came out lower than anticipated, there will more than likely have to be a “repricing of the dollar.” That being said, the Bank of Japan continues to buy unlimited bonds, meaning that they are essentially “printing yen.” As long as that is going to be the case, then the Japanese yen is going to be relatively weak regardless.

From a technical analysis standpoint, if we break it down from here the JPY127.50 level should be supported, just as the JPY125 level will be. The JPY125 level also has added interest in it due to the 50-day EMA sitting in that same general vicinity. The market will continue to be very noisy, but I think given enough time the overall uptrend will continue. Markets cannot go in one direction forever so a little bit of a correction could make quite a bit of sense. However, I would look at that as more or less a correction until we break down below the JPY125 level.

I think choppy behavior is probably thought of as bullish as well because it shows that the market is not willing to sell-off. If we do get a very strong CPI number, then we may try to break above the highs from the Monday session, opening up a move to the JPY132 level, possibly even the JPY133 over the next couple of days. The uptrend is a bit stretched, but there is nothing on this chart that says we are in imminent danger of turning things around. We would need to see the Bank of Japan change its attitude, as well as the Federal Reserve to do the same for a complete reversal.

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