Essay: FOREX Forecast of US Dollar

Sample Essay

U.S Dollar and Japanese Yen

Introduction

The US Dollar has declined considerably against the Japanese Yen since the 1970’s. The dollar has fallen from a level slightly above 350 to record levels below 90. The strength of Japanese Yen against the US Dollar is basically due to the strong fundamentals of the Japanese economy. The stable growth of Japanese economy for a long time coupled with an efficient monetary and fiscal policy has strengthened it against major currencies of the world.

The technical analysis also shows significant support of Japanese Yen against the US Dollar as the levels of USD JPY loom between 101.50 and 87.50. Analysts consider the rechecking of the Yen from the level of 101.50 just as the rally above the levels of 87.10 is considered corrective (Saettele, 2009). The support levels of a currency are levels where the falling price is supported and there is a psychological barrier on part of currency traders with respect to this level. The resistance level is quite opposite to the support levels as it is the level of resistance in a rising market. The support and resistance levels of a currency help in identifying the key points in a market which highlight significant turning points of a currency.  If a psychological level of a currency is breached in an upper or lower move the market follows in that direction quite rapidly.

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