USD/JPY Price Forecast – US Dollar Sluggish at 109 JPY

The US dollar has initially tried to rally during the trading session on Tuesday but gave back the gains to return to the ¥109 level, an area that has been somewhat resistive over the last couple of days. Quite frankly, I think this market is well overdone and it does make quite a bit of sense that we would see a little bit of a hesitation in this general vicinity, as the market needs to find some type of news catalyst to continue going higher or perhaps even breaking back down.

USD/JPY Video 17.03.21

Luckily, Wednesday afternoon will give that catalyst. Jerome Powell will give a question and answers session after the FOMC announcement, and traders around the world will be listening very closely as to whether or not the Federal Reserve is paying attention to bond yields. If they are content to let yields run even higher, then this pair will go looking towards the upside. However, if they are going to do some type of bond buying program or yield control, that will send this pair much lower, at least from the short-term perspective. Longer-term, the interest rate differential between the US treasury market and the JGB market remains very wide, and that should continue to favor the US dollar in general.

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To the downside, I would be very interested in buying closer to the ¥107 level, as we are so overbought. However, it will be up to Jerome Powell as to whether or not this pair offers any value any time soon. With that being the case, between now and the afternoon on Wednesday, this is a pair that probably remains very choppy.

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