CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• USD/JPY rebounds into a key resistance zone after the release of stickier-than-expected US CPI data. 
• The pair has hit a tough ceiling where two major moving averages converge. 
• USD/JPY is at risk of rolling over and continuing its short-term downtrend. 

USD/JPY rebounds after the release of higher-than-forecast US Consumer Price Index (CPI) data for February. The data increases the probability the Federal Reserve will retain interest rates at their current relatively high levels for longer. Higher interest rates are a positive for a currency since they result in higher capital inflows. 

USD/JPY has rallied off of the data and run into a substantial resistance zone made up of two major moving averages: the 50 (red) and 100-day (blue) Simple Moving Averages (SMA). Given the overall short-term trend is bearish and still assumed intact, the pullback could provide sellers with the perfect opportunity to short the currency pair. 

US Dollar vs Japanese Yen: Daily chart

Impact of CPI on US Dollar could be temporary

Although the CPI data beat estimates most of the upside was mainly due to higher Gasoline prices which are seen as a variable inflationary pressure that is less likely to endure. This suggests upside for the US Dollar (USD) – and the USD/JPY – is likely to be tempered and short-lived. 

The Yen is supported by expectations and rumors swirling that the Bank of Japan (BoJ) will soon raise its base interest rates from negative levels. Some even hypothesize the country could be exiting the moribund growth trend of the last 30 years.  This has been responsible for the USD/JPY’s recent descent.   

US Dollar vs Japanese Yen: 4-hour chart

Given the pair remains in a short-term downtrend despite the pullback of recent days, it is vulnerable to eventually rolling over and falling again. 

There are no indications on the 4-hour chart above that the pullback higher has ended, however, so it remains too early to say with any certainty whether the pair will start going lower again. Some sort of candlestick reversal pattern would ideally form to warn traders of a resumption of downside, but this has not yet happened.

If the pair does revolve lower, however, it is likely to fall back down to the 146.48 March 8 lows. 

If USD/JPY breaks below the 146.48 lows it will probably fall to support at the 146.22 and the 200-day SMA, followed by 145.89, the February 1 low. 

The performance of USD/JPY will be driven today by the release of the latest US Consumer Price Index (CPI) report for February, economists at MUFG Bank say.

Another upside inflation surprise would more seriously challenge the Fed’s outlook for inflation to continue to slow

• USD/JPY bounces back to 147.50 as BoJ rate hike bets ease.
• BoJ Ueda doubts Japan’s economic strength amid weak consumption.
• Fed policymakers would confirm that inflation will return to 2% before considering rate cuts.

The USD/JPY pair recovers to 147.50 after a two-day consolidation in the European session on Tuesday. The asset rebounds as the Japanese Yen weakens after Bank of Japan (BoJ) voiced doubts over Japan’s economic outlook.

BoJ Ueda said in Tuesday’s Asian session that the economy is recovering on a few economic grounds as consumption remains weak. Also, Finance Minister Shunichi Suzuki said separately that Japan was not at a stage where it could declare a victory over deflation. The commentary from BoJ Ueda and FM Suzuki has dampened market expectations for the BoJ exiting the negative rates.

The expectations for BoJ quitting the expansionary policy stance were significantly higher before BoJ Ueda’s commentary as the revised estimate for Japan’s Q4 Gross Domestic Product (GDP) shows that the economy was not in a technical recession in the second half of 2023. The revised estimates show that the economy grew by 0.1% against a degrowth of 0.1% indicated from the preliminary estimates.

Also, a few BoJ policymakers expressed optimism for a positive wage cycle, which could keep inflation sustainably above the desired rate of 2%.

Meanwhile, the market sentiment remains upbeat ahead of the United States Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT. The inflation data will provide a fresh outlook on the US interest rates. Federal Reserve (Fed) policymakers want to see inflation data easing for months as evidence before considering a dovish interest rate decision.

• USD/JPY remains just shy of 147.00 following last week’s declines.
• Japan’s Q4 GDP print early Monday missed the mark.
• US CPI inflation is expected to come in mixed.

USD/JPY kicked off the new week on the low side of the 147.00 handle, with the pair steeply off of March’s early highs above 150.00. Markets are geared up for Tuesday’s US CPI inflation print as investors continue to seek out signs the Federal Reserve (Fed) could be pushed into early rate cuts if inflation eases off rapidly enough.

Japan’s Q4 Gross Domestic Product (GDP) print came in below expectations, but managed to recover from the previous QoQ decline of -0.1%. Q4 GDP printed at 0.1%, missing the forecast 0.3%. Annualized Q4 GDP in Japan also missed the mark, coming in at 0.4% versus the forecast rebound of 1.1%, though GDP growth still improved from the previous figure of -0.4%.

US CPI Preview: Forecasts from 10 major banks, inflation still too high

February’s US MoM CPI print is expected to accelerate to 0.4% from 0.3% as uneven inflation continues to weigh. Core MoM CPI, which excludes food and energy prices, is expected to tick down to 0.3% from 0.4%. 

Annualized CPI is forecast to hold at 3.1% with Core YoY CPI expected to  come in at 0.3% versus the previous 0.4%.

USD/JPY technical outlook

USD/JPY is notably on the week side heading into a new trading week, with the pair pinned on the south side of the 147.00 handle heading into the early Tuesday session. The pair is down over 2.5% from March’s peak bids near 150.70, with February’s all-time highs at 150.88.

Last week accelerated into the bearish side, extending a technical drag down the chart paper after the previous week snapped an eight-week winning streak. USD/JPY has closed flat or in the green for eight consecutive weeks, but now the pair is getting dragged back into bear country. The last meaningful technical floor sits at the last swing low into the 146.00 handle, with the 200-day Simple Moving Average (SMA) rising into 146.22.

USD/JPY hourly chart

• USD/JPY enters oversold territory suggesting the chance of a pullback. 
• The pair has fallen rapidly over recent weeks due to expectations the BoJ will raise interest rates, 
• The pair is now probably in a short-term downtrend, favoring bears. 

USD/JPY is trending lower since peaking in mid February. It has fallen about $4.00 since Valentine’s Day and is currently trading in the upper 146.00s. 

Expectations that the Bank of Japan (BoJ) will raise its base interest rates from negative levels are fueling a rally in the Yen. The country could even be exiting the moribund growth trend of the last 30 years, analysts at Rabobank hypothesize.  

Combined with a weaker US Dollar, which has been falling on the expectation the Federal Reserve (Fed) is moving closer to cutting interest rates – made more certain by a string of dismal employment data – has led USD/JPY’s charge down.   

US Dollar vs Japanese Yen: 4-hour chart

The pair has fallen so swiftly and deeply that it is now probably in a short-term downtrend, which overall favors bearish bets. 

There are some caveats, however, to the bearish outlook. 

The pair has declined so much in recent sessions it has now entered the oversold zone on the Relative Strength Index (RSI), on the 4-hour chart. This suggests the risk of a pullback evolving. 

When RSI enters oversold the advice is for traders not to add any new bearish bets to their positions, however, neither should they close their existing shorts. 

They should only close existing shorts and open longs when the RSI exits oversold and starts rising again. 

US Dollar vs Japanese Yen: Daily chart

A move higher would probably soon encounter resistance in the region of 147.60-148.00 where the 100 and 50-day Simple Moving Averages (SMA) are situated. 

Given the pair is now in a short-term downtrend, however, it will probably eventually rollover and start falling again, back down to the 146.48 March 8 lows. 

If the pair breaks below the 146.48 lows it will probably fall to support at the 146.22 and the 200-day SMA, followed by 145.89, the February 1 low. 

USD/JPY has dropped as the market adjusts to the prospect of a new era for the Bank of Japan (BoJ). Economists at Rabobank analyze the pair’s outlook.

BoJ to retain a cautious pace on policy normalisation, curtailing upside potential for the Yen

• USD/JPY extends losing streak on firm BoJ rate hike bets.
• The revised estimate shows that the Japanese economy accelerated meager by 0.1% in the last quarter of 2023.
• The US Dollar will dance to the tunes of the US Inflation data.

The USD/JPY extends its losing spell for the fifth trading session on Monday. The asset drops 146.70 on broader weakness in the US Dollar and rising expectations for the Bank of Japan (BoJ) exiting its expansionary interest rate stance in the March monetary policy meeting.

BoJ policymakers have indicated that a positive wage cycle will continue for a substantial period that will keep inflation sustainably above the desired target of 2%. Investors hope that the BoJ will scrap its Yield Curve Control (YCC) and will shift to policy normalization.

Meanwhile, expectations for the BoJ raising interest rates have also been prompted, as the revised estimate for Japan’s Q4 Gross Domestic Product (GDP) shows that the economy was not in a technical recession in the second half of 2023. The revised estimates show that the economy grew by 0.1% against a degrowth of 0.1% indicated by the preliminary estimates.

On the US Dollar front, the expectations for the Federal Reserve (Fed) reducing interest rates from the June policy meeting remain firm as labor market conditions have cooled down despite upbeat job growth. The United States employers recruited 275K jobs, against expectations of 200K and the prior reading of 229K, downwardly revised from 353K. The Unemployment Rate rose to 3.9% from 3.7%.

Firm expectations for the Fed unwinding its restrictive policy stance for June have built pressure on the US Dollar. The US Dollar Index (DXY), which gauges Greenabck’s value against six major currencies, drops to 102.70.

For further guidance, investors await the US Consumer Price Index (CPI) data for February, which will be published on Tuesday. Investors should note that the soft Average Hourly Earnings data for February, released on Friday, indicates cooling inflation expectations.

• USD/JPY extends its losing spell as the Japanese Yen strengthens on hawkish BoJ bets.
• The US Dollar weakens on firm expectations for the Fed reducing interest rates in June.
• Investors await the US NFP for fresh guidance.

The USD/JPY pair continues its losing spell for the fourth trading session on Friday. The asset falls vertically to 147.00 on firm expectations that the Bank of Japan (BoJ) will pivot to raising interest rates after keeping them in the negative territory for more than a decade.

S&P 500 futures are positive in the European session, indicating a higher risk appetite of the market participants. The 10-year US Treasury yields have dropped significantly to 4.07% as Federal Reserve (Fed) Chair Jerome Powell has recognized the need to dial back the restrictive monetary policy stance to prevent the economy from falling into a recession.

Market expectations for the BoJ exiting the ultra-dovish policy stance increase after a few policymakers said a positive wage cycle is in sight. This has convinced investors that steady wage growth would keep inflation above the 2% target. Investors hope that the BoJ will quit the expansionary policy stance itself in the March policy meeting.

Meanwhile, the US Dollar is under pressure Fed Powell said the central bank is not so far from gaining confidence that inflation will come down to 2%. The US Dollar Index (DXY) has continued its five-day losing spell to Friday and has refreshed its seven-week low at 102.70.

Going forward, the US Dollar will be guided by the US Nonfarm Payrolls (NFP) data for February, which will be published at 13:30 GMT. The Unemployment Rate is anticipated to remain unchanged at 3.7%. Economists have anticipated that the United States employers recruited 200K jobs, lower than the robust hiring of 353K in January. 

USD/JPY trades near fresh five-week lows below the 148.00 level. However, Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, does not expect the Japanese Yen (JPY) to continue strengthening. 

Yen unlikely to strengthen too much in the medium to long term

• USD/JPY recovers intraday losses ahead of US employment data on Friday.
• US Dollar gains ground on market sentiment around Fed rate cuts in June.
• US Nonfarm Payrolls could fall to 200K new jobs in February, lower than the previous figure of 353K.

USD/JPY trims some of its intraday losses on Friday on improved US Dollar (USD) amidst weaker US Treasury yields. Nonetheless, the pair remains in negative territory and continues the losing streak for the fourth successive day, trading around 147.90 during the European trading hours.

The weekly depreciation of the US Dollar against the Japanese Yen is around 1.50%, by the press time, which can be attributed to the positive sentiment surrounding expectations of the Federal Reserve (Fed) initiating a rate-cut cycle starting in June. The CME FedWatch Tool indicates a 56.7% probability of a 25 basis point rate cut in June. Additionally, Federal Reserve Chair Jerome Powell hinted at the possibility of interest rate cuts occurring sometime this year during his second day of testimony before the US Congress.

Additionally, Cleveland Fed President Loretta Mester spoke at the Virtual European Economics and Financial Center, stating apprehension regarding the potential persistence of inflation throughout the year. Mester mentioned that if economic conditions align with forecasts, there may be a probability of rate cuts later in 2024.

The Japanese Yen (JPY) experiences a boost in response to growing speculation that the Bank of Japan (BoJ) will depart from its ultra-loose monetary policy stance, thereby weakening the USD/JPY pair. BoJ Governor Kazuo Ueda mentioned that it is "fully possible to seek an exit from stimulus while striving to achieve the 2% inflation target."

BoJ Governor Ueda also stated that the extent of rate hikes would depend on the prevailing circumstances if negative rates are lifted. Furthermore, BoJ policy board member Junko Nakagawa highlighted that the likelihood of achieving the 2% inflation target sustainably is gradually improving.

In January, Japan's non-seasonally adjusted Current Account Surplus decreased to ¥438.2B, from the previous figure of ¥744.3B. However, the surplus exceeded expectations, reaching ¥330.4B. This outcome could potentially provide some support for the Japanese Yen. Meanwhile, traders are eagerly anticipating US employment data, which includes Average Hourly Earnings and Nonfarm Payrolls, to gain further insights into the economic situation in the United States.

• USD/JPY loses traction near 147.70 amid the softer USD and BoJ’s hawkish comments. 
• BOJ policymakers said the economy was moving towards its 2% target, raising the chance that BoJ will end its negative rate. 
• The US Nonfarm-Payrolls will be a closely watched event for traders. 

The USD/JPY pair drops to fresh five-week lows below the 148.00 mark during the early Asian trading hours on Friday. A weaker US Dollar (USD) and growing speculation that the Bank of Japan (BoJ) will exit from an ultra-loose monetary policy stance lift the Japanese Yen (JPY) and exert some selling pressure on the USD/JPY. At press time, the pair is trading at 147.70, down 0.26% on the day. 

The Bank of Japan's (BOJ) governor and board members said on Thursday the economy was moving towards the central bank's 2% inflation target, raising the possibility that the BOJ will end its negative interest rates for the first time since 2007. The hawkish comments from BoJ policymakers lift the JPY to a one-month high against the USD

On the other hand, Fed Chair Jerome Powell said the US central bank is "not far" from gaining enough confidence that inflation will reach its 2% target to begin lowering interest rates. The Fed Chair didn’t provide a precise timetable for rate cuts, as Fed officials want to see more evidence before considering cutting rates. 

Market participants will take more cues from the US February labor market report on Friday. The US Nonfarm-Payrolls is projected to see 200,000 jobs added to the US economy. The unemployment rate is estimated to hold steady at 3.7%, while Average Hourly Earnings are forecast to ease to 0.2% MoM versus 0.6% MoM in January. 

• USD/JPY falls vertically to 148.00 as hawkish BoJ bets strengthen the Japanese Yen outlook.
• BoJ Nakagawa said a positive cycle for wages and inflation seems now achievable.
• Higher expectations for Fed rate cuts in June have built downward pressure on the US Dollar.

The USD/JPY plummets to 148.00 in Thursday’s European session as expectations for the Bank of Japan (BoJ) lifting negative interest rates have escalated. Increased bets for the BoJ turning to policy normalization due to improved wage outlook have strengthened the Japanese Yen.

Japan’s administration and some BoJ policymakers admit they expect a positive wage cycle, which could keep inflation steadily above the 2% target. In the Asian session, BoJ board member Junko Nakagawa said, “Prospects for the economy to achieve a positive cycle of inflation and wages are in sight.”

On Wednesday, Jiji News Agency reported that some members of the Bank of Japan’s (BoJ) Monetary Policy Committee (MPC) would favor an exit from an ultra-loose monetary policy stance at the March policy meeting. Also, BoJ board member Hajime Takata said last week that the central bank’s goal of maintaining inflation above 2% on a sustainable basis is ‘finally in sight’.

On the contrary, BoJ Governor Kazuo Ueda believes that the central bank will not abandon its ultra-dovish policy stance until he is convinced that inflation will sustainably remain above 2%.

Meanwhile, weak US Dollar has also resulted in downward pressure on the USD/JPY pair. The US Dollar Index (DXY) hovers near a monthly low of around 103.20 as expectations for the Federal Reserve (Fed) reducing interest rates in the June policy meeting have increased. In the semi-annual report to Congress, Fed Chair Jerome Powell said, "It will likely be appropriate to begin dialing back policy restraint at some point this year."

Going forward, the US Dollar will dance to the tunes of the United States Nonfarm Payrolls (NFP) for February, which will be published on Friday. The economic data will provide fresh insights into the labor market conditions.

USD/JPY has fallen back below the 148.00 level. Economists at Société Générale analyze the pair’s outlook.

Yen shorts are finally being cut back for the BoJ meeting

• The USD/JPY has climbed back to near previous peaks above 150, could this be a sign it is topping?
• Indicators remain mostly ambivalent and price action relatively muted so it’s too early to say. 
• Rumors the BoJ may be about to raise interest rates have stimulated talk of a USD/JPY breakdown

The USD/JPY pair has been a broad, sweeping sideways trend since peaking in October 2022. Although higher lows have suggested an underlying bullish bias the pair has failed to surpass the 2022 highs, indicating an overall balanced market. 

Rumors that the Bank of Japan (BoJ) could be preparing to raise interest rates have reignited speculative interest in the Yen and led many to hail a renaissance in the currency. 

Japan’s negative interest rates have long made the Yen a popular funding currency for the carry trade. This is an operation in which investors borrow in a currency with a low interest rate, like the JPY, and use the relatively cheap loan to fund the purchase of a currency with a higher interest rate, such as the US Dollar (USD), pocketing the difference in rates as profit. Over time this has acted as a negative factor for JPY and driven the USD/JPY to new highs. 

US Dollar vs Swiss Franc: Weekly chart

From a technical perspective the pair overall remains in a sideways trend, with some bearish signs appearing on the horizon. 

As can be seen on the weekly chart above, after peaking at 150.84 last week, USD/JPY has entered the zone of previous major highs in the 151s – possibly a sign it is topping – however, there has so far been insufficient downside price action to definitively say it is rolling over. 

The lack of upside momentum, however, is a sign the uptrend could be waning. The Moving Average Convergence/Divergence (MACD) has shown much less progress higher during the 2024 rally compared to the 2023 rally, suggesting bulls are tired. Still, without a concomitant decline in price as well, the long-term technical conclusion is neutral. 

US Dollar vs Swiss Franc: Daily chart

The daily chart above shows more compelling evidence the pair could be about to move lower. The MACD has just given a sell signal after the blue MACD line crossed below the red signal line at the end of February. 

The indicator has reliably signaled the turning points in the medium-term sideways trend – both after the November 2023 highs and the January 2024 lows – so it is possible it may be correctly signaling the next move down. If so, the next downside target lower would be at around 148.00 where the 100 and 50-day Simple Moving Averages (SMA) are situated. 

US Dollar vs Swiss Franc: 4-hour chart

The 4-hour chart, used to assess the short-term trend, is showing the formation of a long sideways range since February 12. Whilst price is currently knocking at the floor of this range and risks a downside break, it is still too early to say this is the case for sure. 

The MACD is relatively low at the moment, suggesting strong downside momentum, however, it would require a break below the base of the range at 149.00, and the 200-4-hour SMA at the same level, to signal a breakdown was actually occurring. Until that happens the short-term trend remains neutral with the potential for a recovery back inside the range. 

If a clear breakout lower did materialize, however, it would suggest a decline to the next target at 148.00 which is equivalent to the height of the range extrapolated lower, and also sits at the confluence of MAs on the daily chart. 
 

USD/JPY is back in the 150.00 range. Economists at CIBC Capital Markets analyze the pair’s outlook.

USD strength could lead to a mildly hawkish BoJ

• USD/JPY drops sharply to 149.50 as bets in favor of BoJ lifting negative rate escalate.
• Improving outlook for Japan’s wage growth would keep inflation sustainably above 2%.
• Investors await Fed Powell’s testimony for fresh guidance on US interest rates.

The USD/JPY pair falls sharply to 149.50 in Wednesday’s London session. The asset come under pressure as the Japanese Yen strengthens after the Jiji News Agency reported that some members of Bank of Japan’s (BoJ) Monetary Policy Committee (MPC) would favor an exit from ultra-loose monetary policy stance at the March policy meeting.

Last week, BoJ board member Hajime Takata said that the central bank’s goal of maintaining inflation above 2% inflation on a sustainable basis is ‘finally in sight’.

The Japanese Yen is expected to broadly outperform if the BoJ lifts negative interest rates, which it has been maintaining from more than a decade as inflationary pressures were unable to sustainably remain above 2%. The reasoning behind inflation remaining below 2% has been vulnerable wage growth. The outlook for wage growth is improving, fanning discussions of quitting the expansionary policy stance. 

Meanwhile, the US Dollar weakens as market expectations for Federal Reserve (Fed) rate cuts in the June policy meeting escalate. The CME FedWatch tool shows that that traders see a little over 57% chance for a rate cut by 25 basis points (bps) in the June meeting. The chances for a rate cut were around 52% on Tuesday.

Going forward, the US Dollar will be guided by Fed Chair Jerome Powell’s testimony before Congress at 15:00 GMT. Fed Powell will provide fresh guidance on when the central bank will start reducing interest rates.

• USD/JPY retreats 0.30%, showing signs of consolidation after touching a weekly peak of 150.57.
• Technical analysis indicates potential pressure points with the Tenkan-Sen and February lows providing support.
• Upside momentum requires reclaiming 151.00, setting the stage for a possible advance toward yearly highs.

The USD/JPY lost traction during the mid-North American session, edged down 0.30%, and exchanged hands at 150.08 after reaching a weekly high of 150.57 on Monday.

USD/JPY Price Analysis: Technical outlook

From a daily chart perspective, the USD/JPY is trading sideways capped on the upside by the 151.00 figure, while on the downside is the Tenkan-Sen at 150.02. A breach of the latter will expose the confluence of the February 29 low and the Senkou Span A at 149.21, followed by the 149.00 mark. Further downside is seen at 148.39 at the Kijun Sen level, before testing 148.00.

On the flip side, if buyers regain the 151.00 figure, that could open the door to challenge the November 16 swing high at 151.38, ahead of last year’s high at 151.91. Above this level, look for 152.00.

USD/JPY Price Action – Daily Chart

• USD/JPY slumps to 150.00, hoping the BoJ will exit the dovish policy stance sooner.
• Japan’s Murai is optimist on a positive cycle of rising growth, improving wage outlook.
• Fed Powell is expected to maintain a hawkish narrative on interest rates.

The USD/JPY pair falls sharply to the psychological support of 150.00 in early American session on Tuesday as hopes of Bank of Japan (BoJ) quitting the decade-long expansionary policy stance have escalated.

In Tuesday's early European session, Japan’s Deputy Chief Cabinet Secretary Hideki Murai said that improving economic and wage prospects are visible.

The BoJ has been postponing its plans of exiting the dovish policy stance as policymakers were less convinced about wage growth being strong enough to keep inflation sustainably above the 2% target. Investors' confidence in the BoJ shifting to policy normalization is improving as the Japanese government is expecting a steady wage growth outlook,

Last week, BoJ board member Hajime Takata said that the central bank’s goal of maintaining inflation above 2% on a sustainable basis is ‘finally in sight.’

Meanwhile, the US Dollar Index (DXY) trades sideways around $103.90 ahead of the United States Institute of Supply Management (ISM) Services PMI for February, which will be published at 15:00 GMT. The Services PMI is forecasted to have dropped to 53.0 from 53.4 in January.

This week, the primary trigger for the US Dollar will be the Federal Reserve Chair Jerome Powell’s testimony before Congress on Wednesday. Fed Powell may reiterate that there is no urgency for rate cuts. The Fed is less likely to reduce interest rates before gaining confidence that inflation will sustainably return to the 2% target.

Is the Bank of Japan (BoJ) ready to act? Economists at Rabobank analyze Yen’s outlook ahead of the BoJ’s March meeting.

USD/JPY to edge lower into the BoJ’s March meeting