USD/JPY Forecast November 2, 2017, Technical Analysis

The USD/JPY pair broke higher during the day on Tuesday, but then pulled back to test the 24-hour moving average again. This is one of my favorite indicators, and it is reasonably reliable in this range bound market as you can see. I believe that the 114.50 level above is resistance, so I’m not looking for a major move now. However, if we can break above the 115 handle, then I would be convinced for the longer-term move. The market could then go to the 118 level after that, but I think we’re going to need to find a bit of momentum building in the meantime. I believe that the 113.50 level underneath is support, but even more so, the 113 level.
Ultimately, this is a market that should continue to be noisy, but I think if you pay attention to the ZN futures market, as the 10-year note has a high correlation with this pair. Overall, I think that the US dollar continues to strengthen against most things, the Japanese yen included. With the Bank of Japan looking very unlikely to raise interest rates or tighten monetary policy anytime soon, it’s likely that this pair will go higher, especially if stock markets can join the party. They have been rallying lately, and it’s likely that the USD/JPY pair will fall right along. Ultimately, this is a market that should continue to be one that you can buy on dips, but I think you need to be careful in so much as buying in small pieces. The volatility will continue, and therefore jumping all in in one shot is probably a recipe for real trouble. Longer-term though, once we break the 115 handle, I’m willing to double my position size in this market.