CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• The Japanese Yen climbs back closer to a multi-month high against the USD on Tuesday.
• BoJ rate hike bets and the risk-off mood provide a goodish boost to the safe-haven JPY. 
• Expectations for more Fed rate cuts undermine the USD and further weigh on USD/JPY.

The Japanese Yen (JPY) attracts some follow-through buying for the second straight day on Tuesday and moves back closer to a multi-month peak touched against its American counterpart last week. The hawkish sentiment surrounding the Bank of Japan's (BoJ) policy outlook continues to underpin the JPY. Moreover, concerns about the potential economic fallout from US President Donald Trump's tariff policies temper investors' appetite for riskier assets and further benefit the safe-haven JPY. 

Adding to this, Trump's threat to Japan over currency depreciation, along with subdued US Dollar (USD) price action, turn out to be other factors exerting some downward pressure on the USD/JPY pair. The JPY bulls, meanwhile, seem rather unaffected by weaker macro data from Japan, which showed an unexpected uptick in the Unemployment Rate and a fall in corporate capital expenditure for the first time in three years. This, in turn, suggests that the path of least resistance for the JPY remains to the upside. 

Japanese Yen is underpinned by hawkish BoJ expectations and the global flight to safety

• Growing speculation that the Bank of Japan will hike interest rates sooner rather than later keeps the yield on the benchmark 10-year Japanese government bond close to its highest level since 2009 and continues to underpin the Japanese Yen. 
• Ukrainian President Volodymyr Zelenskiy's meeting with US President Donald Trump ended in disaster on Friday. A White House official confirmed that the US has paused military aid to Ukraine, which adds to the uncertainty in markets.
• Trump’s tariffs on Mexican and Canadian goods will take effect this Tuesday, along with a new 10% levy on Chinese goods. China’s Commerce Ministry vowed to take necessary countermeasures to safeguard legitimate rights and interests.
• Trump said on Monday that he has warned the leaders of China and Japan against devaluing their currencies against the US Dollar, arguing that such actions put American industries at a disadvantage.
• Japan's Finance Minister, Katsunobu Kato, said on Tuesday that the country is not pursuing a policy of devaluing the domestic currency and Japan has confirmed its "basic stance on currency policy" with US Treasury Secretary Scott Bessent.
• Speaking at a separate news conference, Japan's Economy Minister Ryosei Akazawa said that the government intervenes in the currency market only when the movement is "speculative".
• Data released earlier this Tuesday showed that the Unemployment Rate in Japan unexpectedly edged up from 2.4% to 2.5% in January and Japanese companies reduced spending on plants and equipment in October-December by 0.2%.
• The Institute for Supply Management's (ISM) Manufacturing PMI slipped to 50.3 in February from 50.9 in the previous month, while the Prices Paid Index jumped to 62.4, or nearly a three-year high amid worries about duties on imports. 
• Moreover, investors remain concerned that Trump's policies would increase price pressures and slow down activity in vital industrial sectors. This might force the Federal Reserve to cut rates further and weigh on the US Dollar.

USD/JPY seems vulnerable to slide further towards the next relevant support near 148.00

From a technical perspective, the overnight failure near the 151.00 support breakpoint, now turned resistance, validates the near-term bearish outlook for the USD/JPY pair. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, supports prospects for an extension of the pair's recent well-established downtrend witnessed over the past two months or so. Hence, some follow-through weakness below mid-148.00s, towards the next relevant support near the 148.00 round figure, looks like a distinct possibility. The downward trajectory could extend further towards the 147.35-147.30 region en route to the 147.00 mark.

On the flip side, the 149.65-149.70 area now seems to act as an immediate hurdle ahead of the 150.00 psychological mark. Any further move up might still be seen as a selling opportunity near the 150.60 region, which, in turn, should cap the USD/JPY pair near the 150.90-151.00 key hurdle. The latter should act as a pivotal point, which if cleared decisively might prompt a short-covering rally towards the 151.40-151.45 intermediate hurdle en route to the 152.00 round figure and the 152.35 region, or the very important 200-day Simple Moving Average (SMA).

• Momentum remains bearish, with key support at 149.00 and 148.57.
• JPY strengthens as safe-haven demand rises amid US trade tensions.
• A rebound above 150.00 could open the door for 151.14 and 152.38.

The USD/JPY begins Tuesday’s Asian session unchanged after registering losses of 0.74% on Monday. Soft US data and tariffs on Mexico, Canada, and China beginning on March 4 keep the Greenback on the backfoot against most G7 currencies. The pair trades at 149.59, up 0.06%.

USD/JPY Price Forecast: Technical outlook

After posting solid gains in the last week, the USD/JPY began the current one negatively as Japanese Yen (JPY) buyers entered the market at a better price. This followed an eight-day rally that witnessed an appreciation of 3.87% for the JPY, which drove the pair from 154.55 to 148.57.

Momentum remains tilted to the downside, as depicted by the Relative Strength Index (RSI). With that said, the USD/JPY's first support would be 149.00. Once surpassed, the next stop would be the February 25 low of 148.57, followed by the September 30 swing low of 141.64.

On the other hand, if USD/JPY recovers and climbs past 150.00, look for a retest of the Senkou Span A at 151.14 before challenging the Kijun-sen at 152.38.

USD/JPY Price Chart – Daily

Chance for overbought US Dollar (USD) advance to test 151.20 vs Japanese Yen (JPY); a sustained rise above this level is unlikely. In the longer run, downward momentum has faded; current price movements are likely part of a rebound that could potentially reach 151.90, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.  

Downward momentum has faded

24-HOUR VIEW: "We did not expect USD to rise sharply to 150.98 last Friday; we were expecting range trading. Although overbought, strong momentum suggests there is a chance for USD to test 151.20. A breach of this resistance is not ruled out, but a sustained rise above this level is unlikely. The major resistance at 151.90 is also unlikely to come into view today. To sustain the overbought momentum, USD must remain above 150.05, with minor support at 150.40." 

1-3 WEEKS VIEW: "After maintaining a negative USD view since the middle of Feb (see annotations in the chart below), we cautioned last Friday (28 Feb, spot at 149.60) that 'downward momentum is slowing.' We added, 'if USD breaks above 150.20 (‘strong resistance’ level), it would mean that the weakness has stabilised.' That said, we did not expect the strong rise in USD that sent it to a high of 150.98. Not only has downward momentum faded, but upward momentum has increased somewhat. We view the current price movement as part of a rebound that could potentially reach 151.90. On the downside, should USD breach the ‘strong support’ level, currently at 149.45, it would suggest that it is likely to trade in a range instead of rebounding further."

Markets continue to see a confluence of risk factors, including Trump’s tariff threats and dividend seasonality trends that may prove 'noisy' for USD/JPY, OCBC's FX analysts Frances Cheung and Christopher Wong note. 

Macro drivers remain intact

"USD/JPY touched a high of 151.02 this morning but was brief as the pair reverted to trade lower. Last at 150.35 levels. Daily momentum is flat while rise in RSI moderated. Bias remains to sell rallies. Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high). Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo)." 

"That said, macro drivers remain intact. Prospects of wage growth, broadening services inflation and upbeat economic activities in Japan continue to support the BoJ policy normalization while fading US exceptionalism validates our bias for the Fed cut cycle to continue." 

"Fed-BoJ policy divergence should underpin broader direction of travel for USD/JPY to the downside. So, maintain bias to sell rallies in USDJ/PY should there be a bounce driven by tariff uncertainty or seasonality trends."

• USD/JPY needs to clear 150.93 to invalidate the broader downtrend.
• Key resistance at 151.00 and Senkou Span A at 151.50.
• Failure to hold 150.00 could push the pair toward 148.57 support.

The USD/JPY rallied for the third straight day after bottoming near 148.60 on Tuesday. It gained over 0.54% and traded back above the 150.00 handle. At the time of writing, the pair is trading at 150.59.

USD/JPY Price Forecast: Technical outlook

The USD/JPY pair's downtrend will remain in place unless buyers reclaim 150.93, the February 7 daily low that turned resistance. The Tenkan-sen at 150.44 was already reclaimed, but key resistance levels reaffirm the USD/JPY bearish scenario.

Bulls must reclaim 151.00 ahead of challenging the Senkou Span A at 151.50. On further strength, up next lies the 200-day Simple Moving Average at 152.43

Conversely, if USD/JPY drops below 150.00, the next support would be the February 25 daily low of 148.57. Once hurdled, the next support would be the December 2024 swing low of 148.64.

USD/JPY Price Chart – Daily

US Dollar (USD) is expected to trade in a 148.80/150.20 range. In the longer run, downward momentum is slowing; a breach of 150.20 would mean the weakness in USD has stabilised, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Weakness in USD has stabilised

24-HOUR VIEW: "We indicated yesterday that the price movements in USD 'are likely part of a range trading phase, probably between 148.55 and 149.75.' We did not anticipate the volatile price action as USD fluctuated between 148.73 and 150.17. The choppy movements have resulted in a mixed outlook. Today, we expect USD to trade in a 148.80/150.20 range."

1-3 WEEKS VIEW: "We have been expecting a lower USD since the middle of the month. In our latest narrative from two days ago (26 Feb, spot at 149.15), we highlighted that 'although the USD weakness from early last week has not stabilised, oversold conditions suggest the pace of any further decline is likely to be slower.' We added, 'only a breach of 150.20 (‘strong resistance’ level) would indicate that the weakness has stabilised.' Yesterday, USD traded choppily, touching a high of 150.17. Downward momentum is slowing, and if USD breaks above 150.20, it would mean that the weakness has stabilised."

Price movements are likely part of a range trading phase, probably between 148.55 and 149.75. In the longer run, USD weakness has not stabilised vs Japanese Yen (JPY); pace of any further decline is likely slower. The next level to monitor is 147.70, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

USD weakness has not stabilised

24-HOUR VIEW: "After USD plummeted to 148.56 on Tuesday and then rebounded, we indicated yesterday (Wednesday) that 'despite the sharp drop from the high, there has been no significant increase in momentum.' However, we were of the view that 'there is a chance for USD to retest the 148.55 level.' USD subsequently briefly dipped to 148.61, rebounded to 149.88, and then pulled back to close largely unchanged at 149.08 (+0.04%). The price movements are likely part of a range trading phase, probably between 148.55 and 149.75."

1-3 WEEKS VIEW: "Our update from yesterday (26 Feb, spot at 149.15) is still valid. As highlighted, although the USD weakness from early last week has not stabilised, oversold conditions suggest the pace of any further decline is likely to be slower. Overall, only a breach of 150.20 (‘strong resistance’ level was at 150.55 yesterday) would indicate that the weakness has stabilised. Until then, there is a chance for USD to drop further, possibly to 147.70."

USD/JPY consolidated at lower grounds as markets lighten positions ahead of inflation reports from Japan and US. Pair was last seen trading t 149.69 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Fed-BoJ policy divergence should push  USD/JPY to the downside

"Divergence in US-JP inflation should continue to weigh on USD/JPY. But going into March, we see a confluence of drivers, including Trump’s tariff threats and dividend seasonality trends that may prove 'noisy' for USD/JPY. That said, macro drivers remain intact."

"Prospects of wage growth, broadening services inflation and upbeat economic activities continue to support BoJ policy normalisation. Fed-BoJ policy divergence should continue to underpin broader direction of travel for USD/JPY to the downside. So, maintain bias to sell rallies in USD/JPY should there be a bounce driven by tariff uncertainty or seasonality trends."

"Daily momentum is bearish while RSI rose from near oversold conditions. Rebound risks not ruled out in the interim but bias to sell rallies. Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo). Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high)."

• The Japanese Yen attracts some sellers amid the recent sharp pullback in JGB yields.
• Bets that the BoJ will hike interest rates further should help limit losses for the JPY.
• Expectations for more Fed rate cuts might cap the upside for the USD and USD/JPY.

The Japanese Yen (JPY) is ticking lower against its American counterpart during the Asian session on Thursday, though it remains close to the highest level since October 2024 touched earlier this week. Bank of Japan (BoJ) Governor Kazuo Ueda's comments last week about potentially increasing regular bond buying led to a further decline in the Japanese government (JGB) bond yields. Apart from this, concerns over US President Donald Trump's tariff plans and a positive risk tone turn out to be key factors undermining the JPY. 

Any meaningful JPY depreciation, however, still seems elusive in the wake of the growing market acceptance that the BoJ will continue raising interest rates this year amid broadening inflation in Japan. In contrast, expectations that a cooling US economy would give the Federal Reserve (Fed) more impetus to cut interest rates keep the US Dollar (USD) bulls on the sidelines and cap the USD/JPY pair. Traders also seem reluctant ahead of the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday. 

Japanese Yen is pressured by declining JGB yields; downside seems limited amid BoJ rate hike bets

• Bank of Japan Governor Kazuo Ueda said last week the central bank was ready to increase government bond buying if long-term interest rates rise sharply, dragging Japanese government bond yields away from a more-than-a-decade high.
• In fact, the yield on the benchmark 10-year JGB touched its lowest level since February 12 and undermined the Japanese Yen, pushing the USD/JPY pair back closer to mid-149.00s during the Asian session on Thursday. 
• Japan’s inflation accelerated at the fastest pace since the summer of 2023 in January and keeps the Bank of Japan on track to raise its benchmark interest rate further, which might hold back traders from placing aggressive JPY bearish bets. 
• US President Donald Trump ordered an investigation on copper imports to assess whether tariffs should be imposed due to national security concerns. Trump also confirmed that tariffs on Canada and Mexico are "on time and on schedule".
• Trump has already raised tariffs on goods from China and threatened new reciprocal tariffs for each country. Furthermore, Trump said on Wednesday that his administration will soon announce a 25% tariff on imports from the European Union.
• Bets for more interest rate cuts by the Federal Reserve are on the rise amid the recent downbeat US macro data, which pointed to a cooling economy and fueled worries about the growth outlook. This keeps the US Dollar bulls on the defensive. 
• Atlanta Fed President Raphael Bostic said on Wednesday that inflation has seen a lot of progress, though is still high and the US central bank should hold rates where they are, at a level that continues to put downward pressure on inflation.
• Investors now look forward to a slew of key economic reports from Japan, due on Friday, including Industrial Production, Retail Sales, and Tokyo inflation, which could provide further clarity on the BoJ's monetary policy outlook.
• Friday's economic docket also features the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge. This would influence the USD and provide a fresh impetus to the USD/JPY pair. 

USD/JPY could attract fresh sellers near the overnight swing high and remain capped near 150.00 

From a technical perspective, the USD/JPY pair has been oscillating in a familiar range since the beginning of this week. This comes on top of the recent downfall from the year-to-date high touched in January and might still be categorized as a bearish consolidation phase. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone, suggesting that the path of least resistance for spot prices remains to the downside. 

Hence, any further move up could be seen as a selling opportunity near the 149.75-149.80 region and remain capped near the 150.00 psychological mark. A sustained strength beyond the latter, however, could trigger a short-covering rally and lift the USD/JPY pair further towards the 150.90-151.00 horizontal support breakpoint, now turned strong barrier. 

On the flip side, the 149.00 round figure now seems to protect the immediate downside ahead of the 148.60 region, or the multi-month low. Some follow-through selling will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair to the 148.00 mark en route to the next relevant support near the 147.35-147.30 area and the 147.00 round figure.

USD/JPY has experienced a steady decline after carving out a lower high at 158.85 than the one achieved in 2024 at 162, BBH's FX analysts report.

Next potential supports might be at 147/146.85 and 145

"It recently gave up the 200-DMA and is now challenging December trough of 148.60, which is an interim support. Daily MACD has dipped below equilibrium line after posting negative divergence denoting prevalence of downward momentum."

"If a short-term bounce develops, the Moving Average at 152.50 could provide resistance. Inability to overcome 152.50 can lead to continuation in decline. Next potential supports could be located at projections of 147/146.85 and 145."

Chance for US Dollar (USD) to retest the 148.55 level vs Japanese Yen (JPY); a sustained break below this level is unlikely. In the longer run, USD weakness has not stabilised; pace of any further decline is likely slower. The next level to monitor is 147.70, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

USD weakness has not stabilised

24-HOUR VIEW: "Following USD sharp rebound from a low of 148.63 two days ago, we highlighted yesterday that USD 'could rebound further, but any advance is unlikely to break above 150.55.' We were not wrong as USD rebounded to a high of 150.30. However, we did not anticipate the sharp selloff from the high, as USD plummeted to a low of 148.56 before rebounding to close at 149.02 (-0.46%). Despite the sharp drop from the high, there has been no significant increase in momentum. That said, as long as 149.70 (minor resistance is at 149.45) is not breached, there is a chance for USD to retest the 148.55 level. Given that momentum is not strong, a sustained break below this level is unlikely."

1-3 WEEKS VIEW: "We turned negative in USD early last week. After USD dropped to 148.63 and rebounded, we indicated yesterday (25 Feb, spot at 149.90) that 'downward momentum has slowed.' We also indicated that 'as long as 151.05 (‘strong resistance’ level) is not breached, there is still a slim chance for USD to drop to 148.63.' The subsequent price movements came as a surprise, as USD lurched lower during the NY session and reached a low of 148.56. Although the USD weakness has not stabilised, oversold conditions suggest the pace of any further decline is likely to be slower. The next level to monitor is 147.70. On the upside, the ‘strong resistance’ has
moved lower to 150.55 from 151.05."

USD/JPY dropped below 149 yesterday, Danske Bank's FX analyst Jens Nærvig Pedersen reports.

USD/JPY is closing in a target of 147

"USD/JPY dropped below 149 yesterday in response to the sharp decline in oil prices and US bond yields that followed an overall deterioration in risk sentiment in financial markets."

"We recommended a short position in USD/JPY and the pair is closing in on our soft target of 147. Hence, the trade has performed well, but we think it has further to go."

• USD/JPY could encounter resistance as the likelihood of additional rate hikes by the Bank of Japan increases. 
• Traders await a set of crucial Japanese economic reports due Friday, including industrial production, retail sales, and Tokyo inflation data.
• The US Dollar gains strength, driven by rising US Treasury yields. 

USD/JPY retraces its recent losses from the previous session, trading around 149.40 during the European hours on Wednesday. However, the upside of the pair could be limited as the Japanese Yen (JPY) may find support amid rising odds of further interest rate hikes by the Bank of Japan (BoJ).

The BoJ is expected to raise rates from 0.50% to 0.75% this year. According to Bloomberg, overnight index swaps fully price in a rate hike by September, with a 50% chance of an earlier move as soon as June.

Meanwhile, traders in Japan are preparing for a series of key economic reports set to be released on Friday. These reports — covering industrial production, retail sales, and Tokyo inflation — could offer crucial insights into the BoJ’s future monetary policy direction.

The US Dollar (USD) strengthens amid rising US Treasury yields, with the US Dollar Index (DXY) — which measures the USD against six major currencies — approaching 106.50. At the time of writing, 2-year and 10-year US Treasury yields have climbed to 4.11% and 4.32%, respectively.

In recent developments, US President Donald Trump has ordered an investigation into potential tariffs on copper imports to support increased US production of this critical metal. Additionally, Trump confirmed that tariffs on Canada and Mexico will proceed once the current one-month delay period concludes next week.

On Tuesday, Thomas Barkin, President of the Federal Reserve Bank of Richmond, predicted another decline in Personal Consumption Expenditure (PCE) inflation later this week, emphasizing the Fed’s notable progress in curbing inflation. While maintaining an overall positive outlook, Barkin underscored the need for a cautious "wait and see" approach given ongoing policy uncertainties.

• USD/JPY climbs to around 149.30 in Wednesday’s Asian session, up 0.23% on the day. 
• Risk-off mood and and rising bet of more rate hikes from the BoJ could support the JPY and cap the pair’s upside. 
• Investors await the speeches from Fed’s Bostic and Barkin later on Wednesday. 

The USD/JPY pair rebounds to near 149.30 during the Asian trading hours on Wednesday. However, the global risk-off sentiment and rising bet of more interest-rate hikes from the Bank of Japan (BoJ) might boost the Japanese Yen (JPY) and cap the upside for the pair. 

The BOJ is anticipated to raise rates from 0.50% to 0.75% this year, which could influence investor sentiment and support the JPY. Overnight index swaps are fully pricing an increase in borrowing costs by September and pricing in a 50% odd move as soon as June, according to Bloomberg.

Japan's Services Producer Pricing Index (PPI) released on Tuesday, supports the case of the BoJ rate hike. This comes on top of Japan's robust consumer inflation numbers, reaffirming the prospect that the BoJ would raise interest rates further, which continues to support the JPY.

The US Conference Board’s Consumer Confidence fell the most since August 2021, declining to 98.3 in February versus 105.3 prior. This, in turn, could weigh on the Greenback against the JPY. Traders will take more cues from the Fedspeak later this week. Any hawkish comments from Federal Reserve (Fed) officials could lift the US Dollar in the near term. 

• US Consumer Confidence plunges to an 8-month low, inflation fears rise.
• Markets now price in 58 bps of Fed rate cuts, up from 40 bps last week.
• BoJ watching services inflation as Ueda signals possible rate hikes.

The Japanese Yen (JPY) extended its gains versus the US Dollar (USD) on Tuesday, which was helped by the fall of US Treasury bond yields as consumer confidence deteriorated further, according to the Conference Board. At the time of writing, the USD/JPY trades at 149.02, down 0.46 at the brisk of clearing the 149.00 handle.

USD/JPY nears 149.00 as falling yields, Fed expectations pressure the dollar

Data revealed earlier showed that Consumer Confidence in February plunged to an eight-month low from 104.1 to 98.3. Digging more into the data, inflation expectations rose to 6% from 5.2% over a 12-month period.

Of note is that tariffs were mentioned in the survey at levels not seen in six years. Today’s data and the University of Michigan survey show that Americans are becoming pessimistic about the economic outlook.

As the US economy weakened, expectations that the Fed would cut rates jumped. Money markets had priced in that the Federal Reserve (Fed) would ease policy by 58 basis points (bps), up from 40 bps last week, revealed data from Prime Market Terminal.

Source: Prime Market Terminal

Consequently, the yield of the US 10-year Treasury note is plummeting ten basis points (bps) to 4.294%.

Richmond Fed President Thomas Barkin stated that he is adopting a wait-and-see approach on interest rate adjustments, emphasizing the need for clear evidence that inflation is steadily moving toward the Fed’s 2% target before considering any policy changes.

In Japan, prices paid by producers accelerated to 3.1% YoY as prices for services continued to rise. The Bank of Japan (BoJ) is watching services inflation to gauge prospects of sustained wage gains. BoJ Governor Kazuo Ueda signaled his willingness to continue raising rates if wage growth accelerates and supports consumer spending, reinforcing the central bank’s data-dependent approach to monetary policy.

Ahead, the Japanese economic docket would feature the Coincident Index Final reading for December, alongside the Leading Economic Index.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart depicts the pair as downward biased, though it seems that sellers cannot drive prices on a closing basis below the December 3 low of 148.64. In that outcome, the next support would be the October 4 daily low of 145.92 ahead of the September 30 swing low of 141.64.

Conversely, if USD/JPY climbs past 150.00, look for further upside as buyers could be poised to challenge the Tenkan-sen at 151.62.

• USD/JPY slides to near 149.30 as the US Dollar underperforms its peers.
• The US Dollar weakens as US bond yields plunge sharply.
• Hot Japan’s National CPI data for January boosts BoJ hawkish bets.

The USD/JPY pair gives up its intraday gains and turns negative in Tuesday’s North American after failing to hold above the psychological figure of 150.00 earlier in the day. The asset declines to near 149.30 as the US Dollar (USD) falls sharply due to a significant decline in bond yields.

10-year US Treasury yields are down 1.7% to near 4.32% at the press time. The demand for US bond yields rose significantly due to an increase in market expectations that the Federal Reserve (Fed) will resume the policy-easing cycle in the June policy meeting.

According to the CME FedWatch tool, the likelihood for the Fed to cut interest rates in the June meeting has increased to 76% from 56% a week ago. The tool also shows that the Fed will keep interest rates steady in the current range of 4.25%-4.50% in the March and May meetings.

Fed dovish bets have accelerated after the release of the United States (US) flash S&P Global PMI data for February, which showed that the service sector activity declined for the first time after 25 months.

Meanwhile, the Japanese Yen (JPY) has been outperforming for the past few weeks amid firm expectations that the Bank of Japan (BoJ) will raise interest rates again this year. BoJ hawkish bets are based on accelerating inflationary pressures. Japan’s headline National Consumer Price Index (CPI) accelerated to 4% in January, the highest level seen in two years.

US Dollar (USD) could rebound further vs the Japanese Yen (JPY); any advance is unlikely to break above 150.55. In the longer run, momentum has slowed; as long as 151.05 is not breached, there is still a slim chance for USD to drop to 148.63, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Any advance is unlikely to break above 150.55

24-HOUR VIEW: "USD fell sharply to a low of 148.90 last Friday. Yesterday, we highlighted that 'there is room for USD to retest the 148.90 before stabilisation is likely.' We added, 'the significant support level at 148.63 is unlikely to come into view.' Our expectations were not wrong, as USD dropped to 148.84, rebounding strongly to close higher by 0.28% at 149.71. Today, USD could rebound further, but any advance is unlikely to break above 150.55. The strong resistance at 151.05 is unlikely to come under threat. Support is at 148.50, followed by 149.20."

1-3 WEEKS VIEW: "In our latest narrative from last Friday (21 Feb, spot at 149.60), we indicated that 'while USD is likely to decline further, short-term conditions are deeply oversold, and the significant support at 148.63 may not come into view so soon.' USD fell and eked out a fresh low 148.84 yesterday and then rebounded strongly. Downward momentum has slowed with the rebound, but as long as 151.05 (no change in ‘strong resistance’ level) is not breached, there is still a slim chance for USD to drop to 148.63."

USD/JPY rebounded overnight, tracking USD rebound.  Pair was last seen at 149.77 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Rebound risks not ruled out in the interim

"US administration’s memorandum to limit Chinese investments, toughen Biden’s chip controls over China and Trump’s comments that the tariffs scheduled to hit Canada and Mexico next month were 'on time' and 'moving along very rapidly' saw the bounce in USD."

"Daily momentum is bearish though while there are signs of it waning while RSI rose. Rebound risks not ruled out in the interim but bias to sell rallies. Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo). Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high)."

"Narrowing of UST-JGB yield differentials should continue to underpin the broader direction of travel to the downside. Last Fri, Governor Ueda said that yields reflect economic recovery and rising price trend – consistent with BoJ Takata’s earlier comments. Ueda also reiterated that BoJ will raise rate if economic conditions improve as expected."

• USD/JPY bounces off 148.85, approaching resistance at 150.73.
• Bullish harami pattern signals potential upside if momentum holds.
• Key resistance at 151.82 and 152.31; downside risk below 148.64.

The USD/JPY rebounds off yearly lows of 148.85 and climbs past the 149.50 mark late during the North American session on Monday, despite overall US Dollar weakness across the board. At the time of writing, the pair trades at 149.72, up 0.30%.

USD/JPY Price Forecast: Technical outlook

The daily chart depicts the pair as downward biased, with the USD/JPY exchange rate below the 200-day Simple Moving Average (SMA) of 152.57 and beneath the Ichimoku Cloud (Kumo).

Short-term, the USD/JPY could aim upward as it is forming the ‘bullish harami’ candle chart pattern. If it clears the February 21 peak of 150.73, the next resistance would be the Tenkan-sen at 151.82, followed by the Senkou Span A at 152.31. A breach of the latter will expose the 200-day SMA.

On the other hand, if USD/JPY surpassed the December 3 swing low of 148.64, the next support would be the September 27 swing high turned support at 146.49.

USD/JPY Price Chart – Daily