CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• USD/JPY ascends following a US inflation report indicating reacceleration, challenging levels that might prompt intervention.
• Rising inflation figures push Treasury yields higher and boost the US Dollar.
• Market anticipates future Fed actions with keen interest in upcoming monetary policy minutes.

The USD/JPY rallied to an almost 34-year high after a hotter-than-expected inflation report in the United States (US) sent US Treasury yields soaring. Consequently, the major climbed past the 152.00 figure, seen as a level that could trigger intervention, which so-far hasn’t happened. At the time of writing, the pair trades at 152.70, gains 0.90%.

The pair advances to 152.70, as US CPI data prompts a sharp yield increase, fueling speculation about Fed's rate path–

US economic data revealed by the Bureau of Labor Statistics (BLS) showed that inflation is reaccelerating. The Consumer Price Index (CPI) rose by 0.4% MoM and 3.5% on the yearly figure, exceeding estimates, with the latter also the previous reading. Underlying CPI, which excludes volatile items like food and energy, was above projections but remained unchanged compared to February’s data at 0.4% MoM and 3.8% YoY.

That triggered a reaction in the financial markets, as US Treasury bond yields skyrocketed, with the short end of the curve, namely the 2-year T-note, climbing 20 basis points. Consequently, the Greenback refreshed the year-to-date (YTD) highs of 105.10 yet retreated somewhat, as shown by the US Dollar Index (DXY). The DXY is up 0.81%, at 104.95.

Following the inflation report, the Chicago Board of Trade (CBOT) Fed funds futures estimate just two rate cuts by December 2024, with speculators projecting interest rates to end at around 4.97%.

The USD/JPY rose sharply and hit a multi-year high of 152.73, a level last seen in June 1990, ignoring intervention threats by Japanese authorities that include Finance Minister Shunichi Suzuki, who said that he was watching the market with a high sense of urgency and wouldn’t rule out any steps to address excessive moves.

Ahead in the calendar, market players are eyeing the latest Federal Reserve monetary policy minutes' release.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY is trading at levels that were seen in the 1990s. With the major extending its gains past 152.00, that exposes as the next resistance level, the June 1990 highest peak at 155.78, followed by the 1990’s high at 160.32. On the flip side, the first support would be the psychological 152.00 level, followed by the Tenkan-Sen at 151.77 and the April 5 low of 150.81.

• USD/JPY stays quiet as the market adopts a cautious stance in anticipation of the US CPI release.
• Japan’s PPI YoY and MoM increased by 0.8% and 0.2%, respectively, in March.
• US headline CPI is projected to accelerate in March, while the Core measure is expected to moderate.

USD/JPY remains silent before releasing of the US Consumer Price Index (CPI) data and the FOMC Minutes on Wednesday. The pair hovers around 151.70 during the Asian trading hours. The Japanese Yen (JPY) could face challenges as Bank of Japan (BoJ) Governor Kazuo Ueda stated that they would not alter monetary policy solely to address FX fluctuations.

Governor Ueda also emphasized that Japan's persistent deflation and low inflation levels have posed challenges in influencing public inflation expectations through monetary base expansion. With trend inflation still below 2%, it remains crucial to support the economy's trajectory towards achieving the 2% target by maintaining accommodative monetary conditions.

Data revealed that Japan’s Producer Price Index (PPI) rose by 0.8% year-on-year in March, meeting expectations and accelerating from an upwardly revised 0.7% gain in February. This marks the highest reading since October last year. However, the monthly PPI increased by 0.2%, falling short of the expected 0.3%.

The US Dollar Index (DXY) strives to maintain its position as it anticipates the release of the US Consumer Price Index (CPI) data and the FOMC Minutes later in the North American session.

The US headline Consumer Price Index is projected to accelerate in March, while the core measure is expected to moderate. The US Dollar is in a state of anticipation, awaiting potential policy shifts influenced by incoming data. Strong labor market figures from last week could lead to a more hawkish stance from the Federal Reserve if inflation exceeds expectations.

Analysts at Rabobank share their short-term outlook for the USD/JPY pair following the latest developments.

USD/JPY to trade at lower levels later in the year

"While a break of USD/JPY152.00 may not trigger FX intervention immediately, we would see a strong chance of the MoF acting to prevent a move to 155.00. Strong US inflation data and soft Japanese economic numbers would increase the risk of the MoF being forced into taking action."

"On the assumption that the BoJ will be able to announce a second rate hike later this year and given the expectation that the Fed will be cutting rates in 2024, we expect USD/JPY to be trading at lower levels later in the year. However, we have raised our 1- and 3-month forecasts to 150.00 and 148.00 respectively from 148.00 and 146.00."

• USD/JPY rises up to within a hair’s breadth of 152.000 after comments from BoJ governor Ueda. 
• His views suggest the BoJ is not in a hurry to raise interest rates, reducing the attractiveness of the Yen.
• Analysts are bullish USD/JPY despite the threat of intervention as US-Japan interest rates continue to diverge. 

USD/JPY is edging higher into the 101.90s on Tuesday. The latest move comes after a speech by the Governor of the Bank of Japan (BoJ) Kazuo Ueda in which he suggested that any future interest rate hikes – a key FX-market driver – would be highly dependent on incoming data. 

Prior to his comments, views had been mixed about the likelihood of the BoJ hiking interest rates in the future. Some analysts saw more interest-rate hikes on the horizon given that core inflation in Japan has remained above the BoJ’s target of 2.0% for 23 consecutive months. 

Others have remained more circumspect, pointing to the fact that in Japan where deflation has ravaged for decades, inflation is actually seen as a positive and something to be fostered.

In his speech Ueda seemed to validate those who expect the BoJ to keep interest rates indefinitely low, by introducing doubt about the imminence of future hikes. 

Inflation still below target, says Ueda

According to Ueda, “Trend Inflation”, a somewhat tricky gauge that differs from official headline and core measures, is still running below 2.0% and likely to do so for quite some time. A change in the BoJ’s policy stance, therefore, would be dependent on this measure of inflation rising. 

“If trend inflation accelerates toward our 2% inflation target, it becomes possible to reduce degree of monetary stimulus somewhat,” said Ueda in his speech on Tuesday. 

The two factors the BoJ would be closely monitoring in regards to inflationary pressures would be wage inflation and services inflation, Ueda added. 

USD/JPY trading at historic highs

USD/JPY has been trading at historic highs due to the difference in interest rates in the two countries. In the US they are above 5.0% whereas in Japan they remain at around 0.0%. 

The difference is significant as it favors the USD over the JPY since investors can reap higher interest payments simply by parking their money in the US. 

The effect of the divergence was highlighted by Japanese Current Account data out on Monday, which showed a lower-than-expected level of net inflows into Japan in February. A surplus of over 3 billion JPY had been expected when actually the figure came out at 2.6 billion JPY. 

Doubts over Federal Reserve plans

The effect of interest-rate divergence on USD/JPY has further been exacerbated by changing expectations of monetary policy in the US. 

Whereas the US Federal Reserve (Fed) had expected to make three 0.25% reductions in interest rates in 2024 the start of the year, the persistence of stubbornly high inflation has led many to doubt this will be the case. 

Strong US labor market data on Friday and an unexpected fall in the Unemployment Rate, have further suggested that inflation is likely to remain sticky as more workers earning are likely to also continue spending. 

A key macroeconomic release on the calendar this week will be US Consumer Price Index (CPI) data out on Wednesday. If the data shows a rise above expectations it will further reduce the probability that the Fed will cut interest rates as much as previously expected. 

The persistence of higher interest rates in the US and lower interest rates in Japan are likely to maintain upside pressure on USD/JPY. 

Intervention Fears

The case of USD/JPY is further complicated by the Japanese government and BoJ’s habit of directly intervening in foreign exchange markets to prop up the Yen.

A quick glance at the charts will immediately suggest to the observer that the current level in the 151s is a level that has rejected price multiple times in the past – both in 2022, 2023 and now again in 2024. This is no coincidence. 

The Japanese authorities have repeatedly said they will not tolerate the Yen weakening above this level as it harms businesses. So they tend to intervene at around the 150-152 band to push the exchange rate lower. 

On Tuesday the Japanese Finance Minister Shunichi Suzuki said the authorities would not rule out any measures in dealing with excessive Yen moves, repeating warnings made in his previous statements, according to TradingEconomics.

This has been interpreted by markets as a verbal intervention. It raises the risk of a physical intervention, however, if the USD/JPY tests 152 or higher. 

USD/JPY to 160, say analysts 

Intervention can only achieve so much, however, and strategists at Bank of America Merill Lynch (BofA) recently said in a note that if the fundamentals continue to show such a wide interest-rate divergence, USD/JPY is likely to break higher regardless of the authorities’ attempts to intervene, and potentially make it to 160. 

Such a scenario, however, would be dependent on the Fed scraping its plans for cutting interest rates in 2024, something currently not envisaged.

A combination of the BoJ holding back from raising interest rates in 2024 and the Fed delaying its plans to cut rates could continue exerting upside pressure on the pair. 

A similar conclusion was reached by analysts at Brown Brothers Harriman (BBH) in a recent note in which they said “It’s only a matter of time before USD/JPY rises”. This, they put down to a combination of the BoJ’s very gradual attempts to raise interest rates and the Fed’s likely delay in making interest rate cuts.

• The US Dollar remains bid, crawling towards the key 152.00 level.
• The upbeat US Nonfarm Payrolls report and Fed officials' recent hawkish comments underpin the USD.
• The interest rate differential between the BoJ and the rest of the world’s major central banks limits Yen's recovery attempts.

The US Dollar has nudged higher against the Japanese Yen on Monday, returning to levels a few pips shy of the 152.00 level. This level triggered a BoJ intervention in 2022 and is considered a line in the sand for the Japanese financial authorities.

The strong US macroeconomic data, namely Friday’s Nonfarm Payrolls report and the recent hawkish tilt of the Fed rhetoric is increasing negative pressure on the Yen. 

Markets are paring back hopes of a Fed rate cut in June, while the BoJ is expected to keep its benchmark rate near zero for some time. This leaves the JPY as the carry trade funding currency of choice, with investors borrowing Yen to look for higher yields elsewhere.

Japanese officials have reiterated their will to step in the market to stem excessive Yen volatility. That is keeping Dollar buyers from placing strong USD longs, although JPY recovery attempts remain limited above 150.85 

USD/JPY is expected to rally above its current range in the 151.000s, according to Strategists at BBH. 

A combination of very gradual BoJ tightening and a more muted than currently priced-in Federal Reserve (Fed) easing cycle are the fundamental catalysts. 

USD/JPY falls due to Ueda – will rise eventually 

“USD/JPY fell by over 0.50% to an intra-day low around 150.80 following hawkish comments from BOJ Governor Ueda.”

“Verbal defense on the Yen continues as Japanese Finance Minister Suzuki and Prime Minister Kishida both warned against excessive yen moves.”

“It’s only a matter of time before USD/JPY breaks higher because we anticipate a gradual BOJ tightening process and a more muted than currently priced-in Fed easing cycle.”

• USD/JPY could meet the immediate barrier around March’s high of 151.97 and the psychological level of 152.00.
• The lagging indicators suggest a confirmation of the bullish trend for the pair.
• The pair could test the support region around the major level of 151.50 and the nine-day EMA at 151.39.

USD/JPY exhibits sideways trading on Thursday, hovering around 151.70 during the European trading hours. The pair may encounter immediate resistance around the recent high of 151.95 marked on Wednesday, which aligns with March’s high of 151.97 and the psychological level of 152.00.

A breakthrough above this level could support further upward movement, potentially allowing the USD/JPY pair to explore the region around the major level of 152.50.

The technical analysis for the USD/JPY pair indicates a bullish momentum, with the 14-day Relative Strength Index (RSI) positioned above the 50 level.

Additionally, the Moving Average Convergence Divergence (MACD) indicator confirms the bullish trend, with the MACD line above the centerline and showing divergence above the signal line.

On the downside, the USD/JPY could find immediate support at a significant level of 151.50, followed by the nine-day Exponential Moving Average (EMA) at 151.39.

A breach below the latter level might exert downward pressure on the USD/JPY pair, potentially leading to a test of the psychological mark of 151.00 before reaching the 23.6% Fibonacci retracement level of 150.67.

USD/JPY: Daily Chart

• USD/JPY hovers near historic highs around 152.00 ahead of Fed Powell’s speech.
• The US ADP Employment report for March has indicated that private labor demand remains strong.
• Investors remain uncertain over Japan’s wage growth spiral.

The USD/JPY pair rebounds to historic highs of 152.00 in Wednesday’s early American session. The asset is expected to extend its upside by easing expectations that the Federal Reserve (Fed) will begin reducing interest rates from the June meeting.

Fed policymakers don’t see any urgency for rate cuts as labor market conditions are tight and the economic outlook is strong. On Tuesday, Cleveland Fed Bank President Loretta Mester said that the central bank sees more risk in cutting interest rates too early. Fed Mester added: “With labor markets and economic growth both being very solid, we do not need to take that risk”. At the same time, she sees three rate cuts as “reasonable” this year.

Meanwhile, the United States ADP reported upbeat employment data for March. The agency reported that private employers hired 184K new workers against expectations of 148K and the prior reading of 155K (revised up from 140K).

Going forward, investors will focus on Fed Chairman Jerome Powell's speech, which is expected at 16:10 GMT. Powell is expected to provide cues about when the central bank will pivot to rate cuts.

Meanwhile, the Japanese Yen is broadly weak as investors lack confidence that the Bank of Japan (BoJ) will tighten its policy sooner due to uncertainty over the wage growth spiral. Investors seem to have digested fears of Japan’s intervention in the FX domain to support the Japanese Yen.

• USD/JPY trades subdued with potential intervention by Japanese authorities.
• Technical analysis shows 152.00 as a crucial hurdle; overcoming this could target the 153.00 level for buyers.
• A break below the Tenkan-Sen could lead to losses below 150.00, with the Ichimoku Cloud providing additional key points for traders.

The USD/JPY remained capped at around 151.50 on Tuesday amid intervention threats from Japanese authorities. The close correlation between the US 10-year Treasury notes yield, and the major hasn’t influenced the pair’s price action, which has remained below the 152.00 mark.

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains capped by the 152.00 figure, though technical support lies at the Tenkan-Sen at 151.12. If buyers reclaim 152.00, that will pave the way for resting the 153.00 figure. On the other hand, if sellers push the exchange rate below the Tenkan Sen, that will pave the way to 151.00.

Once surpassed, the next support emerges at the Senkou Span A at 10.17, followed by the Kijun-Sen at 149.23. Further weakness in the pair could send it toward the Senkou Span B at 148.93, well inside the Ichimoku Cloud (Kumo).

USD/JPY Price Action – Daily Chart

• USD/JPY’s next move depends on the actions of the Fed, according to a BofA strategist. 
• If the Fed cuts the USD/JPY could fall to 142; if not it could rally higher. 
• Intervention is like “leaning against the wind” if the Fed decides not to cut, the market will press higher. 

USD/JPY has been seesawing in a narrow range in the 151.000s over the last two weeks as threat of intervention from the Japanese authorities keeps bulls timid whilst stronger-than-expected US data keeps bears in check. 

The direction of USD/JPY’s next move has been the subject of much speculation but the factor that will be the most significant is the actions of the US Federal Reserve (Fed), according to Thanos Vamvakidis, Global Head of G-10 FX Strategy, Bank of America Merril Lynch (BofA). 

“To a large extent USD/JPY relies on the Fed. If the Fed does not cut rates it could go to 160.000, it does cut rates 142.000,” said Vamvakidis in an interview with Bloomberg News.  

If the Fed cuts rates in line with current expectations it will weigh on USD/JPY since it will reduce the advantage of keeping cash in US Dollars (USD) compared to Japanese Yen (JPY) from the point of view of the amount of interest that can be earned. 

Stronger-than-expected US data in recent weeks, however, has led some Fed policy makers to row back on promises to cut interest rates in the summer. Over the Easter weekend, Chairman Powell sounded more hawkish – meaning more in favor of keeping interest rates higher for longer – and the markets reacted by buying US Dollars. 

The probability of a first rate cut by the Fed in June has now fallen to just above 50% according to the CME FedWatch tool, from over 70% only a few weeks ago. At the start of the year the market was even pricing in a decent likelihood of a first rate cut in March. If the trend for “kicking the can” of interest rate cuts down the road continues, the timing of a first cut could get pushed back even further – to the autumn, winter or even next year.

BoJ out of the Picture 

The Bank of Japan (BoJ) on the other hand is unlikely to play a key role and Vamvakidis suggests it is unlikely the BoJ will rush to raise interest rates to combat rising inflation. Japan has the opposite economic problem to most of the rest of the world. 

“Japan is a completely different case – inflation there is a solution, not a problem. They are happy to see persistent inflation. It is above the target but not by much. And they have a long history of 30 years deflation.

“They will remain very cautious, leaning in the other direction compared to the other central banks,” said Vamavakidis. 

The Intervention Level

In March, Masato Kanda, Vice-Minister of Finance for International Affairs said the Yen had weakened beyond what market fundamentals warranted. He added that the Japanese Authorities would be ready to intervene if the Yen depreciated any further. From past experience of intervention, any level above 150.000 is considered a target for intervention. 

“I think 152 is a critical level at this point where we will expect intervention in a scenario where they do expect the Fed to start cutting this year. But if the market prices no cuts by the Fed this year they will realize the level is higher..” Said the Global Head of G-10 FX.”

Even if the authorities intervene, however, they won’t have the power to plug the levee forever, and it will eventually break, pushing USD/JPY higher.  

“It will be more like leaning against the wind. They know very well, also from the past, that these interventions don’t work, it is mainly a threat, so they can create some caution in the market, some two-way risk. 

“They know very well everything depends on the Fed. If they just buy some time with intervention until the Fed starts to cut rates it will be fine, but if the Fed does not cut this year then there is nothing these interventions can do.” Said Vamvakidis. 

• USD/JPY is modestly up, reflecting a cautious market amidst higher US Treasury yields and potential for Japanese intervention.
• Technical indicators suggest resistance at 152.00, with further targets at 153.00 and 155.00 should the major break higher.
• A move below the Tenkan-Sen could see USD/JPY testing support levels down to 148.93, amid ongoing market vigilance.

The USD/JPY remains subdued amid speculation of possible intervention by Japanese authorities. Although US Treasury yields pushed higher during Monday’s session, with the 10-year benchmark note rate rising 11 basis points, the pair stood shy of the day’s high of 151.77. At the time of writing, the major trades at 151.63, up 0.15%.

USD/JPY Price Analysis: Technical outlook

The USD/JPY daily chart depicts the pair consolidating around the 151.00/152.00 region, with intervention threats strengthening the 152.00 mark as a first resistance level. A breach of the latter will expose the 153.00 psychological figure, ahead of 155.00.

On the other hand, if the USD/JPY pulls back below the Tenkan-Sen at 151.12, that would send the pair sliding to the Senkou Span A at 150.17, followed by the Kijun-Sen at 149.22. Further downside is seen at the Senkou Span B at 148.93.

USD/JPY Price Action – Daily Chart\

• USD/JPY dips following February's Core PCE data, indicating a gradual cooling of inflation but concerns linger.
• Fed officials maintain a cautious outlook on rate cuts, awaiting further evidence of sustained disinflationary trends.
• Market awaits insights from Fed Chair Powell and other Fed speakers.

The USD/JPY posts  minuscule losses following the release of the US Core Personal Consumption Expenditure (PCE) price index, the US Federal Reserve’s preferred inflation gauge. Data came as expected with prices continuing to trend lower, though at a slower pace. The major trades at 151.25, down 0.09%.

USD/JPY reacts modestly to the latest US economic indicators

The US Bureau of Economic Analysis (BEA) revealed that the Core PCE was lower than expected in February, coming at 0.3% MoM, below the previous month’s data. Yearly data cooled from 2.9% to 2.8%, as estimated by the consensus. Headline inflation came at 0.3% below January’s forecasts, and in the 12 months to February, it was higher than the previous month at 2.5%, up from 2.4%.

Although the data relieves pressure on the Federal Reserve, policymakers continue to take a cautious stance. Other inflationary readings, such as the Consumer Price Index (CPI) and the Producer Price Index (PPI), show signs that inflation is becoming entrenched above the 3% threshold.

On Wednesday, Fed Governor Christopher Waller was hawkish, saying the US central bank is in no rush to cut rates. Later, San Francisco Fed President Mary Daly and Fed Chair Jerome Powell would cross newswires, with traders eyeing their comments.

Even though the disinflationary process is evolving, the labor market is re-tightening again, following four consecutive weeks of fewer Americans filing for unemployment benefits. That can increase spending, which consequently could push prices higher.

Wells Fargo analysts cited by Bloomberg noted “We really just haven’t seen that consumer fatigue that we were getting some hints of in the last month’s data, …. That’s going to make it really hard, I think, for businesses to hold the line on prices if consumers are still willing to splash out at these levels.”

USD/JPY Price Analysis: Technical outlook

The daily chart portras the pair consolidated at around the 151.15/151.60 area, unable to gather tration in eigher way, as Japanese authorities threatened to intervene in the markets. Nevertheless, if the USD/JPY pushes above 152.00, that an clear the path to challenge 153.00. On the flip side, buyers failure to hold prices above 152.00 and 151.00, could sponsor a leg down. The first support would be the Tenkan Sen at 150.49, followed by the Senkou Span A at 149.86.

• USD/JPY struggles as BoJ’s cautious approach to keep monetary conditions accommodative.
• Japanese CPI (YoY) rose 2.6% in March, from the previous reading of a 2.5% rise.
• The strength of the US Dollar is bolstered by hawkish statements from Fed officials.

USD/JPY remains calm and hovers around 151.40 during the early European hours on Friday. Tokyo Consumer Price Index (YoY) for March climbed 2.6% following a 2.5% rise in February. Meanwhile, the Core Tokyo CPI climbed 2.9% year-over-year, down from a 3.1% rise in February.

Japanese Finance Minister Shunichi Suzuki made remarks on Friday emphasizing the importance of stable currency movements aligned with economic fundamentals. He expressed concern about rapid fluctuations in foreign exchange (FX) markets, attributing speculative activity to these movements. Suzuki stated that authorities are closely monitoring FX developments with a strong sense of urgency and are prepared to take necessary measures to address disorderly FX movements.

Japanese Prime Minister Fumio Kishida remarked on Thursday that it was fitting for the central bank to "maintain accommodative monetary conditions." Kishida also emphasized that the government would persist in collaborating with the Bank of Japan (BoJ) to facilitate wage increases and steer the economy away from deflation. The Japanese Yen (JPY) likely faced challenges due to the Bank of Japan's cautious approach to maintaining accommodative monetary conditions, thereby supporting the USD/JPY pair.

The US Dollar Index (DXY) strengthens, nearing 104.60, as recent data indicates annualized economic expansion in the United States (US), driven by consumer spending. In the fourth quarter of 2023, the US Gross Domestic Product (GDP) Annualized expanded by 3.4%, surpassing market expectations of remaining unchanged at a 3.2% increase. The US Gross Domestic Product Price Index remained steady with a 1.7% increase, in line with expectations for Q4.

The hawkish statements from a Federal Reserve (Fed) official, reinforced the Greenback. Fed Governor Christopher Waller's comments on Wednesday hinted at a potential delay in interest rate cuts, given the strong inflation figures.

• USD/JPY trades on a stronger note around the mid-151.00s on Friday. 
• Japan’s Kishida said it was appropriate for the BoJ to maintain easy monetary policy. 
• Fed’s Waller stated there is no rush to cut rate and need to maintain it for longer than expected

The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan (BoJ) to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen (JPY). Additionally, the hawkish comments from the Federal Reserve (Fed) officials provide some support to the US Dollar (USD) and USD/JPY. 

Data released from the Statistics Bureau of Japan reported that the headline Tokyo Consumer Price Index (CPI) for March climbed 2.6% YoY following a 2.6% rise in February. Meanwhile, the Tokyo CPI ex Fresh Food, Energy climbed 2.9% YoY, down from a 3.1% rise in February. However, the JPY remains on the defensive following the Japanese inflation data and the dovish comments from the Japanese authorities. 

On Thursday, Japanese Prime Minister Fumio Kishida said that it was appropriate for the central bank to “maintain accommodative monetary conditions.” Kishida further stated that the government will continue to work closely with the BoJ to ensure wages continue to rise and the economy exits from deflation. 

Nonetheless, the potential intervention from the Japanese authorities might cap the weakening of the JPY. Japan finance minister Shunichi Suzuki came in some verbal intervention on Friday, saying that he will closely watch the foreign exchange moves with a high sense of urgency and will not rule out any actions to respond to disorderly the FX moves.

On the USD’s front, stronger US economic data and the high-for-longer rate narrative from the Fed lift the Greenback against its rivals. The Fed Governor Christopher Waller, the most outspoken policy hawk, said on Thursday that the central bank is in no rush to cut the benchmark rate and may need to “maintain the current rate target for longer than expected.” Waller added that they need to see more inflation progress before supporting rate cuts.

Next week, Japan’s Tankan Large Manufacturing Index for the first quarter (Q1), along with the US ISM Purchasing Managers Index (PMI) report, will be due. The US Nonfarm Payrolls (NFP) for March on April 5 will be a closely watched event. 

• USD/JPY hovers at 151.28, with traders wary of potential Japanese market intervention to support the Yen.
• US Q4 GDP growth surpasses expectations at 3.4%, while jobless claims and consumer sentiment indicate a robust economy.
• Fed Governor Waller's hawkish stance underscores the need for sustained inflation progress, influencing rate cut expectations.

The USD/JPY remains subdued during the North American session, trading at 151.28, almost flat, amid renewed fears of Japan’s intervening in the markets to cap the Japanese Yen (JPY) weakness.

USD/JPY trades cautiously with US economic growth and job data in focus, alongside Japan's intervention warnings

Market sentiment is mixed amid thin liquidity trading as the year's first quarter ends. US economic data revealed the country grew 3.4% in the last quarter of 2023, exceeding the preliminary reading of 3.2%, according to the Bureau of Economic Analysis.  In the meantime, inflation measures on a quarterly basis hit the Federal Reserve’s (Fed) objective of 2%,

Other data showed that Initial Jobless Claims for the week ending March 23 were below market expectations of a 215K increase and came to 210K, lower than the previous week. The data shows that the labor market remains tight, which could deter the Fed from cutting rates.

At the same time, the University of Michigan Consumer Sentiment index rose to its highest level since July 2021, climbing to 79.4, exceeding estimates of 76.5. Pending Home Sales recovered in February, increasing 1.6% MoM after plunging -4.7% in January and above the consensus of 1.5%.

On Wednesday, the Fed’s Governor Christopher Waller delivered hawkish remarks. He said that rates need to be higher for longer than expected and that more inflation progress is needed before supporting a rate cut. He sees the beginning of the easing cycle in 2024, though he suggests that back-to-back months of inflation data heading to 2% are needed.

On the Japanese front, the Bank of Japan Summary of Opinions revealed that members said that Yield Curve Control, negative interest rates, and other measures of stimulus accomplished their roles.  Meanwhile, Japanese authorities' verbal intervention deterred traders from opening fresh long bets in the USD/JPY pair as intervention threats loom.

USD/JPY Price Analysis: Technical outlook

The daily chart suggests the USD/JPY has peaked at around the 151.20/151.90 area, although the bullish bias remains. A clear break above 152.00, could pave the way for challenging 153.00. On the other hand, a pullback is seen if sellers push the exchange rate below 151.00, with the Tenkan/Sen seen as first support at 150.44, followed by 150.00 and the Senkou Span A at 149.84.

• USD/JPY trades back and forth above 151.00 ahead of the Fed’s preferred inflation gauge.
• Risk-perceived currencies are facing the heat of uncertainty ahead of the US core PCE for February.
• Investors need more clarity about BoJ’s intervention to support the Japanese Yen.

The USD/JPY pair trades sideways in a narrow range around 151.30 in the London session on Thursday. The asset is expected to remain stuck in a tight range as investors are expected to build fresh positions after getting more clarity on the Bank of Japan’s stealth intervention plans in the FX domain to support weakening Japanese Yen. Also, the United States core Personal Consumption Expenditure Price Index (CPE) data, which will be published on Friday, is expected to keep investors on the sidelines.

The annual inflation gauge is expected to have grown at a steady pace of 2.8%. The monthly underlying inflation data is forecasted to have increased slowly by 0.3% from January’s reading of 0.4%. Investors will keenly focus on the inflation data to gauge when the Federal Reserve (Fed) may begin trimming interest rates.

An asset-specific action is observed in global markets as risk-sensitive currencies have been hit hard amid uncertainty ahead of US core PCE for February. While S&P 500 futures are unchanged. The US Dollar Index (DXY) refreshes six-week high at 104.72. 10-year US Treasury yields have rebounded to 4.23%.

The US Dollar strengthens as Fed Governor Christopher Waller’s commentary on the interest guidance negatively impacts Fed expectations for rate cuts in the June meeting. Fed Waller said there is no need to rush for policy rate cuts due to sticky price pressures and a strong economic outlook. Waller added, “Further progress expected on lowering inflation "will make it appropriate" for the Fed to begin reducing the target range for the federal funds rate this year," reported Reuters.

The expectations for BoJ’s intervention in the FX domain have increased as investors lack confidence that Japan’s central bank will not be able to move forward with positive interest rates due to an uncertain wage growth outlook. However, the summary of opinions at the BoJ's March meeting, released on Thursday, showed that many policymakers saw the need to go slow in phasing out ultra-loose monetary policy, Reuters reported.

Speculation over Japanese FX intervention remains high. Economists at ING analyze the USD/JPY outlook after the pair touched a multi-decade high near 152.00 on Wednesday.

Higher US rates and low volatility weigh

USD/JPY is trading sideways near 151.35. Economists at Société Générale analyze the pair’s outlook.

150.20 is first support

The Japanese Yen (JPY) continues to languish. Economists at Scotiabank analyze USD/JPY outlook.

A rapid move higher in the JPY is possible