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USD/JPY Forecast: Bounces Against the Japanese Yen – 15 November 2022

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This is a disaster that the Federal Reserve made, and it’s one that they must deal with now.

The USD/JPY bounced a bit during the trading session on Monday, gaining over 1% as the bloodbath against the yen seems to be abating.The market may have gotten it completely wrong last week, as they started going nuts on the idea that the CPI number was “only 7.7%” year-over-year.That is still extraordinarily inflationary, and the Federal Reserve will almost certainly continue to be very tight.


On the other side of the equation, you have the Bank of Japan, which has already stated that it is going to keep its interest rates down to 0.25% on the 10-year note. In other words, they are “flooding the market with yen.” In that scenario, it leads to a one-way trade. Nonetheless, this is a market that I think will continue to try to go to the upside, because quite frankly the market is out of sorts now. At this point, it looks as if the ?140 level is going to be an area of intense interest, and if we can break above the ?142.50 level, then I think it’s very likely that we continue to try to take out the selloff from last week.

In that scenario, it’s very likely that this market will continue to be noisy because quite frankly there are a lot of people out there begging the Federal Reserve for a handout because that’s how they’ve been raised. It’s been 14 years since market participants have had to stand on their own without cheap money, and it most certainly is starting to show itself as a problem. This is a disaster that the Federal Reserve made, and it’s one that they must deal with now.

With this, I think we have a situation where we will eventually get to the highest again because I know that the Bank of Japan is nowhere near stepping away from what they been doing, and Jerome Powell keeps reiterating the same issues. With this being the case, I think we got a one-way trade coming again, but that does not mean that it won’t be difficult at times. Ultimately, I have no interest in shorting this pair, at least not until the Bank of Japan changes its overall monetary policy, something that’s not happening anytime soon. With this, I’m optimistic but I’m not throwing a ton of money at the market in one shot.

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