FX.co ★ Forecast for USD/JPY

Dollar demand slightly rose on Monday, causing the market to grapple with the 135,325 yen level, trying to break through it.

Clearly, USD/JPY remains affected by interest rate differential, especially since the Federal Reserve is very aggressive, while the Bank of Japan continues to do everything possible to counter the rise in interest rates, thereby controlling the yield curve.

The Bank of Japan has a limit on interest rates for 10-year bonds at 50 basis points, so every time the market starts to sell off, they intervene. To lower interest rates, they buy their own bonds by flooding the market with yen.

Meanwhile, the US has a fairly tight monetary policy, which will continue for some time despite hints from the Fed that there may not be a rate hike in June. That was only because dollar is going through tough times.

Today's chart indicates that the Japanese yen will continue to lose ground, and if the level of 135,252 is overcome, the price will continue to strive for the level of 138. However, to hit this level, there will be a slight pullback in price.