USD/JPY Forecast: The USD Continues to Look to Higher Levels – 18 October 2022

One side of the equation, the US dollar continues to go higher due to the fact that the Federal Reserve has a very tight monetary policy. Ultimately, this is a market that I think will continue to see short-term pullbacks as buying opportunities due to the fact that the Federal Reserve is likely to continue to see the need to tight monetary policy as inflation is raging out of control in the United States. This has the influence of higher exchange rates and interest rates.

On the other side of the equation, yet the Bank of Japan which is buying “unlimited bonds” which is the same thing and was printing unlimited currency. Ultimately, this is a market that I think continues to see the Japanese yen get eviscerated, but there might be the occasional intervention or pullback that people can take advantage of. In other words, I think this remains a “buy on the dips” type of situation for traders going forward, with the ?145 level underneath being a potential support level based upon the previous resistance that was found there.

The 50-Day EMA underneath continues to climb, and probably defines the entire trend. Ultimately, the market is likely to continue to see plenty of buyers, and it looks as if we are getting ready to go looking toward the ?150 level, which of course is a major area that will attract a lot of headlines and could cause a bit of a huge push back. Either way, the trend is to the upside and that’s not changed any time soon. In fact, we need to see the Bank of Japan change its overall monetary policy of buying bonds. That is very unlikely to happen anytime soon, due to the fact that Kuroda stated just last week that they were going to continue doing so.

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