Dollar into Yen Forecast: Strong Bullish Momentum Expected
In this week’s monthly and weekly Forex forecast, analysts examine the trading support and resistance levels for various currency pairs. One key focus is on the Dollar into Yen pair, which has experienced significant bullish behavior. The Bank of Japan’s loose monetary policy and potential upward trajectory are driving market expectations.
According to historical data spanning two decades, several methodologies have consistently yielded profitable results in Forex trading. These include identifying the most strongly trending currency pairs over the past six months, trading against counter-trend movements, and engaging in carry trade strategies.
However, the Forex market witnessed increased directional volatility. The overall results came down to 48% of major currency pairs and cross-fluctuating by more than 1%. Nonetheless, volatility is expected to decrease in the upcoming week due to fewer high-impact events.
USD/JPY Analysis: Role Reversal Levels and Profitable Trades
Among the popular currency pairs, the USD/JPY pair has shown interesting support and resistance levels. The level at ¥139.03, previously acting as both support and resistance, was expected to provide support. Indeed, it did, as indicated by the rejection of this level at the start of last Tuesday’s New York session. This bullish rejection signaled a profitable trade opportunity.
Currently, the USD/JPY pair is rallying, with strong bullish momentum observed. While the psychological level of ¥140 is significant, the primary support level is located at ¥138, forming the top of an ascending triangle pattern. As long as the Bank of Japan maintains its loose monetary policy, analysts foresee the trajectory of the pair continuing to rise. The ascending triangle pattern suggests a potential climb to ¥148, and possibly even higher based on a massive “W pattern.”
Danske Bank analysts hold a cautious outlook, considering the USD/JPY pair overvalued from a fundamental standpoint. They anticipate a strategic decline below 130 within the next 6 to 12 months. The Bank of Japan’s forthcoming policy decisions and economic indicators will play a crucial role in determining the future trajectory of the Japanese yen.
BoJ Policy Impact: Bank of Japan’s Monetary Policy and its Influence on USD/JPY
The recent policy announcement by the Bank of Japan reaffirmed its commitment to maintaining monetary easing measures. Meanwhile, it will continue monitoring economic activity, prices, and financial conditions. However, as Japan’s economic recovery gains momentum, there is a growing possibility that the BoJ may tighten its monetary policy. The market will pay particular attention to wage figures set to be released in three weeks.
Danske Bank’s strategists highlight the importance of May’s wage figures as a gauge for broader wage pressures, potentially influencing policy decisions at the next BoJ meeting. Adjustments to the 0% 10-year yield target tolerance band are likely to be considered.
The recent depreciation of the Dollar into Yen has attracted attention. Therefore, officials remain prompt to monitor forex market movements. While officials stress the importance of stable forex markets that reflect economic fundamentals, Danske Bank’s analysts maintain their bearish perspective on the Japanese Yen coin, citing fundamental overvaluation.
Looking ahead, Danske Bank predicts a descent below 130 for the Dollar to Yen conversion pair within a strategic timeframe of 6 to 12 months. Japan’s economic indicators and the Bank of Japan’s policy decisions will be crucial factors influencing the cross’s future movements in the coming months.
