USD/JPY Price Forecast – rallies but fails during Tuesday session

The US dollar has rallied a bit during the trading session on Tuesday but found enough resistance above the turn things around and show signs of weakness. Because of this, I think that we will probably go lower to look for support, and I do expect that we will find that given enough time. I believe that the support extends down to the ¥109.25 level, and therefore I think it’s very difficult to sell this market anytime soon, as it’s only a matter of time before the buyers get involved. We have two keep in mind that this market has a certain political risk factor to it as well, and with so much noise around the G7 meeting, it’s possible that we could see a lot of volatility here.

However, it’s likely that we will recover eventually, as this tends to be a bit of a short-term phenomenon more than anything else. Interest rate differentials between the two economies continue to favor the United States, and in the long run that should also continue to favor the US dollar over the Japanese yen. If we did break down below the ¥109.25 level, then that would be a negative sign, perhaps unwinding the market down to the ¥108 level, and then the massive support level at the ¥107.50 level. Longer-term, I believe that we should go to the ¥112.50 level, as the market has a lot of resistive structure and that general vicinity.