US Dollar Forecast: USD/JPY Selloff Brings Test of October Low

US Dollar Outlook: USD/JPY

USD/JPY appears to have reversed ahead of the July 1990 high (152.25) as it fails to defend the opening range for November, and the exchange rate may attempt to test the October low (147.29) as it extends the series of lower highs and lows from last week.

US Dollar Forecast: USD/JPY Selloff Brings Test of October Low

USD/JPY registers a fresh monthly low (148.11) despite a rebound in long-term US Treasury yields, and the exchange rate may no longer respond to the positive slope in the 50-Day SMA (149.48) as it trades below the moving average for the first time since July.

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As a result, USD/JPY may depreciate over the remainder of the month even though the Bank of Japan (BoJ) continues to carry out Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC), and it remains to be seen if the Federal Reserve will adjust the forward guidance at its next interest rate decision on December 13 as the central bank is slated to update the Summary of Economic Projections (SEP).

US Economic Calendar

FOREX.com Economic Calendar

Until then, speculation surrounding US monetary policy may sway USD/JPY as Fed Chairman Jerome Powell keeps the door open to further combat inflation, and the Federal Open Market Committee (FOMC) Minutes may influence foreign exchange markets should a majority of Fed officials prepare US households and businesses for a more restrictive policy.

However, the US Dollar may face headwinds if a growing number of Fed officials show a greater willing to keep US interest rates on hold, and USD/JPY may continue to carve a series of lower highs and lows as it no longer responds to the positive slope in the 50-Day SMA (149.48).

With that said, USD/JPY may depreciate over the remainder of the month as it fails to defend the opening range for November, and the exchange rate may attempt to test the October low (147.29) as it reverses ahead of the July 1990 high (152.25).

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

• USD/JPY snaps the opening range for November after failing to test the July 1990 high (152.25), and the exchange rate may no longer respond to the positive slope in the 50-Day SMA (149.48) as it trades below the moving average for the first time since July.
• The recent series of lower highs and lows may push USD/JPY towards the October low (147.29), with a break/close below the 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement) region opening up the September low (144.45).
• Nevertheless, failure to test the October low (147.29) may curb the bearish price series, with a move above the 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension) area bringing the monthly high (151.91) on the radar.

Additional Market Outlooks:

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--- Written by David Song, Strategist

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