CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

January CPI data in Japan confirmed inflation remains above the Bank of Japan's 2.0% target. The Yen “survived” the release, but remains around very weak levels and in FX intervention region, economists at ING say.

Yen dodges a bullet

USD/JPY is approaching the 2023 high of 152.00. Economists at Société Générale analyze the pair’s technical outlook. 

146.00/145.50 is a crucial support zone

• USD/JPY advances toward 151.00 as uncertainty over BoJ’s plans of exiting the dovish monetary stance deepens.
• The Fed is widely anticipated to keep interest rates unchanged in March and May policy meetings.
• Investors await the US core PCE inflation and Japan’s inflation data.

The USD/JPY pair marches toward the crucial resistance of 151.00 in the early New York session. The asset holds strength amid uncertainty ahead of a data-packed weak.

Considering slightly bullish overnight futures, the S&P500 is expected to open on a positive note. The US Dollar Index (DXY) falls to near 103.70 on hopes that the Federal Reserve (Fed) will pivot to reducing interest rates sometime this year. 10-year US Treasury yields have dropped to 4.25%.

This week, investors will focus on the United States core Personal Consumption Expenditure price index (PCE) data for January, which will be published on Thursday. The economic data will guide market expectations of rate cuts by the Fed.

As per the CME FedWatch tool, investors see the Fed keeping interest rates unchanged in the range of 5.25%-5.50% in the March and May policy meetings. The market participants expect that the Fed will reduce interest rates by 25 basis points (bps) in June.

Meanwhile, Fed policymakers continue to reiterate the need to keep interest rates unchanged until they get evidence that inflation will come down to the 2% target.

On the Japanese Yen front, investors await the National Consumer Price Index (CPI) data for January, which will be published on Tuesday. The market participants are anticipating that price pressures may dip below 2%. This would derail hopes of the Bank of Japan (BoJ) exiting the expansionary monetary policy stance.

Japan’s inflation data for January will be released on Tuesday. Economists at ING analyze the Japanese Yen (JPY) outlook ahead of the Consumer Price Index (CPI) report.

Inflation may fall below 2.0% and hit the Yen

• USD/JPY dips but retains gains for the week with a slight 0.17% increase, hinting at a bullish undertone.
• Technical outlook suggests neutrality with an upward bias, positioned above the Ichimoku Cloud.
• Resistance and support levels outlined for potential bullish continuation or pullback scenarios.

The USD/JPY retreats, after hitting weekly highs of 150.77, aim back below the 150.50 figure late in the North American session. The major exchanges hands at 150.44, down 0.05%, but set to finish the week with gains of 0.17%.

From a technical perspective, the pair is neutral to upward biased, remaining well positioned above the Ichimoku Cloud (Kumo). Price action suggests that buyers need to push the USD/JPY above the February 13 high at 150.88 to remain hopeful for a bullish continuation. The next resistance would be 151.00, followed by last year’s high at 151.91. Relative Strength Index (RSI) studies remain bullish, indicating that buyers might have the upper hand.

Conversely, if sellers drag the USD/JPY below 150.00, that will pave the way for a pullback. The next demand area will be the Tenkan-Sen at 150.05, followed by the Senkou Span A at 149.22. A further downside is seen at the Kijun Sen at 148.39.

USD/JPY Price Action – Daily Chart

• USD/JPY slumps from 151.00 amid correction in the US Dollar.
• Easing Japan’s inflation would dwindle BoJ’s plans of quitting the dovish policy stance.
• Fed Waller prefers to delay rate cuts.

The USD/JPY faces an intense sell-off from 150.80 in Friday’s early New York session. The asset has come under pressure as the US Dollar retraces vertically, even though Federal Reserve (Fed) policymakers argue in favor of keeping interest rates at their current level.

Considering positive overnight futures, the S&P500 is expected to open on a bullish note amid improved market sentiment. The US Dollar Index (DXY) corrects to 103.80 as the appeal for safe-haven assets wanes. 10-year US Treasury yields have dropped to 4.30%.

Fed policymakers are not interested in unwinding their restrictive interest rates stance as they are less convinced that inflation will sustainably return to the 2% target.

On Thursday, Fed Governor Christopher Waller added he wants to see inflation data for at least a couple of months to judge whether stubborn figures in January were mere short-term fluctuations or progress in inflation easing towards 2% has stalled. Waller added that risks associated with delaying rate cuts are lower than acting on them too quicky.

On the Japanese Yen front, investors await the National Consumer Price Index (CPI) data for January, which will be published on Tuesday. The annual CPI excluding fresh food is expected to come out below 2.0% at 1.8% against the former reading of 2.3%. This would dampen the Bank of Japan’s (BoJ) plans to exit the decade-long expansionary policy stance.

• USD/JPY rallied from an early Thursday dip.
• The pair remains bolstered above 150.00 after US PMIs mixed.
• Next week sees Japan CPI and US GDP, PCE figures.

USD/JPY dip and rallied on Thursday, etching in a low of 150.02 before recovering into the 150.60 region after US PMIs came in mixed but overall pointed to the upside. With the brunt of the week’s data releases out of the way, USD/JPY traders will be pivoting to look ahead to next week’s hefty economic calendar.

Forex Today: Markets maintain their focus on rate cut bets

The US Purchasing Managers Index (PMI) mixed on Thursday, with the S&P Global Services PMI for February dipping to 51.3 versus the forecast decline to 52.0 from 52.5. The Manufacturing component unexpectedly rose to 51.5 versus the forecast downtick to 50.5 from January’s 50.7, and the Manufacturing PMI rebound helped to ringfence declines in the Composite PMI, which printed at 51.4 MoM for February compared to the previous month’s 52.0.

Read more: US S&P Global Manufacturing PMI improves to 51.5

With Japan coming back to the market fold after taking the day off to celebrate Japanese Emperor Naruhito’s birthday, a federally-observed holiday, USD/JPY markets return in full just in time to see Friday’s Federal Reserve (Fed) Monetary Policy Report before shuttering for the weekend.

Next week sees Japan’s National Consumer Price Index (CPI) early Tuesday, followed by US Gross Domestic Product (GDP) figures on Wednesday. Japan’s National CPI excluding Fresh Food is expected to recede further to 1.8% for the year ended January compared to the previous period’s 2.3%. 

On the US side, annualized GDP for 2023’s fourth quarter is expected to hold steady at 3.3%.

Next Thursday sees Japanese Retail Sales early in the day before US Personal Consumption Expenditure (PCE) Price Index figures land on markets. Japanese Retail Sales are expected to rebound to 2.3% from 2.1% YoY in January, while the Core US PCE Price Index is forecast to heat up to 0.4% MoM versus the previous 0.2%.

USD/JPY technical outlook

USD/JPY has seen a thin bullish lift since bottoming out on Monday at 149.68, and the pair recovered to the high side of the 150.00 handle before running into familiar technical resistance near 150.50.

The USD/JPY pair has closed flat or bullish six consecutive trading weeks and is on pace to chalk in a seventh straight green week. The pair continues to extend a recovery from the major swing low into 140.25, and bulls will be looking to gather enough steam to drag the USD/JPY back into the 152.00 handle, a level buyers failed to break in last November’s surge, stopping at 151.91.

USD/JPY hourly chart

USD/JPY daily chart

The Japanese Yen (JPY) is the weakest G10 currency in the year to date and USD/JPY is holding just below its November 2023 highs. Economists at Rabobank have revised their USD/JPY forecasts. 

November high just below 152.00 to act as strong resistance

The stand-out funding currency, the Japanese Yen (JPY), is the worst performer at -6% year-to-date versus the US Dollar (USD). Economists at ING analyze USD/JPY outlook.

Under-valued, but weighed by the carry trade

• USD/JPY reaches 150.30, gaining ahead of key Fed meeting insights, maintaining an upward trajectory.
• Technical indicators highlight bullish stance, with potential resistance near 151.00 amid intervention concerns.
• Support levels at 149.91 and 149.15 to be tested if retreat below 150.00 occurs, signaling possible shifts.

The USD/JPY climb above the 150.00 figure extended its gains ahead of the release of the minutes of the lates Federal Reserve’s (Fed) meeting. At the time of writing, the pair trades at 150.30, up by 0.20%.

The daily chart portrays the pair as upward biased, sigting above the Ichimoku Cloud (Kumo) and above the Tenkan and Kijun-Sen. That along with Relative Strength Index (RSI) studies at bullish territory, would suggest the USD/JPY could test the 151.00 figure and beyond, if not for Japanese authorities threats to intervene the markets. A breach above 151.00 would expose last year’s high of 151.91.

Conversely, if USD/JPY drops below the 150.00 mark, that would exacerbate a test of the Tenkan-Sen at 149.91. Once cleared, the next support would be the Senkou Span A at 149.15, followed by the Kijun-Sen at 148.39.

USD/JPY Price Action – Daily Chart

• USD/JPY could break below immediate support at the 150.00 psychological level.
• A break below a nine-day EMA at 149.81 could lead the pair to test the major support at 149.50.
• Technical indicators suggest a confirmation of the bullish trend for the pair.

USD/JPY seems to remain in the negative territory for the third consecutive day. The USD/JPY pair hovers near 150.10 during the European session on Wednesday. The immediate support appears at the psychological level of 150.00.

A break below the latter could impact the USD/JPY pair to test the nine-day Exponential Moving Average (EMA) at 149.81 followed by the major support at 149.50. If the pair breaks the major support, it could approach the psychological support zone around the 149.00 level following the 23.6% Fibonacci retracement level of 148.50.

However, the technical analysis for the USD/JPY pair suggests a bullish momentum as the 14-day Relative Strength Index (RSI) is positioned above the 50 level. Additionally, the lagging indicator of the Moving Average Convergence Divergence (MACD) signals a confirmation of the bullish trend, with the MACD line positioned above the centerline and the signal line.

On the upside, the USD/JPY pair could find the resistance zone around the weekly high at 150.43 and the major barrier at 150.50 level. A breakthrough above this zone could lead the pair to revisit February’s high at 150.88 followed by the psychological resistance level of 151.00.

USD/JPY: Daily Chart

• USD/JPY hovers at 149.96, influenced by a dip in US Treasury yields and a subdued Dollar.
• Market's tight range near 150.00 may shift, watching for Japanese authority interventions.
• A move below 150.00 might steer USD/JPY towards 149.00, as an uptrend seeks to top 150.00 again.

The USD/JPY is almost flat as Wednesday’s Asian session begins after posting minuscule losses of 0.09% on Tuesday, at the time of writing trades at 149.96. The drop in US Treasury bond yields and a subdued US Dollar (USD) were the two reasons that favored the Japanese Yen (JPY).

The pair has consolidated at around the 149.90-150.00 area for the last three trading sessions, capped on the upside by fears that Japanese authorities might intervene. However, if bulls push prices decisively above 150.00, that will pave the way toward the February 13 high at 150.88, followed by the 151.00 mark.

Conversely, if the USD/JPY tumbles below the Tenkan-Sen at 149.91, that would exacerbate the pair’s fall toward the Senkou Span A area at 149.15 before testing the 149.00 area. A breach of the latter will expose the Kijun-Sen at 148.39, ahead of the 148.00 mark.

USD/JPY Price Action – Daily Chart

• USD/JPY falls to near 150.00 amid a sell-off in the USD Index.
• Fed policymakers warned that over-focusing on a one-time inflation increase could be a tremendous mistake.
• The BoJ may postpone plans of exiting the expansionary monetary policy stance.

The USD/JPY pair falls slightly below the psychological support of 150.00 in the early New York session on Tuesday. The asset has faced selling pressure as the US Dollar Index (DXY) has extended its downside to 104.00.

The USD Index has dropped to a weekly low as Federal Reserve (Fed) policymakers are confident that inflation is in the right direction despite a one-time stubborn-than-anticipated consumer price inflation data for January.

Fed policymakers advised that over-focusing on one-time blips in inflation data could be a tremendous mistake. As per the CME FedWatch tool, investors see interest rates remaining unchanged in the range of 5.25%-5.50% till the July policy meeting as the Fed needs more good inflation data for months.

The Japanese Yen performs better against the US Dollar despite easing hopes for the Bank of Japan (BoJ) quitting the decade-long ultra-dovish monetary policy stance. The Japanese Yen entered a recession in the second half of 2023. The situation of a poor domestic economy is an unfavorable situation for exiting the expansionary policy stance.

USD/JPY oscillates in a Symmetrical Triangle formation on an hourly time frame. The upward and downward-sloping borders of the aforementioned chart pattern are plotted from February 13 low and high at 149.27 and 150.88, respectively.

The triangle could breakout in either direction, however, the odds marginally favor a move in the direction of the trend before the formation of the triangle – in this case up.

The 50-period Exponential Moving Average (EMA) around 150.20 remains sticky to spot prices, indicates indecisiveness among market participants.

Going forward, a decisive break above February 13 high at 150.88 would drive the asset towards November 16 high at 151.43, followed by November 13 high at 151.90.

On the flip side, a breakdown below February 13 high at 149.27 would drag the asset towards February 5 high at 148.90. Breach of the latter would expose the asset to January 29 high at 148.32.

USD/JPY hourly chart

Yield differentials need to turn down before we buy the Yen, Kit Juckes, Chief Global FX Strategist at Société Générale, says.

There should only be a few more weeks of pain for Yen ‘dip-buyers’

• USD/JPY extends gains on risk-off sentiment ahead of FOMC minutes.
• The US Fed is expected to avoid any rate cut in March and May.
• Japan’s official Atsushi Mimura stated government communicates with other countries regarding FX intervention.

USD/JPY strengthens for the third consecutive trading day, supported by a stronger US Dollar (USD). This uptrend can be attributed to market sentiment, which is biased towards the possibility of the Federal Reserve (Fed) refraining from implementing any rate cuts in the upcoming meetings in March and May. This sentiment has been reinforced by stronger data on consumer and producer prices released last week. The USD/JPY pair trades higher around 150.30 during the early European session on Tuesday.

ANZ has forecasted that the Federal Reserve (Fed) could commence a rate-cutting cycle starting from July in mid-summer. According to the CME FedWatch Tool, there is a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting.

The US Dollar Index (DXY), which gauges the value of the US Dollar against six other major currencies, ends its four-day losing streak. The DXY trades higher around 104.30, with 2-year and 10-year yields on US bond coupons standing at 4.64% and 4.29%, respectively, at the time of writing.

On the other side, Japanese Finance Ministry official Atsushi Mimura stated on Tuesday that the government "is continually communicating and coordinating with other countries regarding FX intervention." He emphasized the importance of maintaining safety and securing liquidity in FX reserves management. Mimura mentioned that the government can sell assets such as savings and foreign bonds in FX reserves when intervention is deemed necessary.

Moreover, Finance Minister Shunichi Suzuki remarked that while a weak Yen has both advantages and disadvantages, he expressed greater concern about the negative implications of a weak currency. In an earlier interview, Suzuki also noted, "The Bank of Japan (BoJ) holds jurisdiction over monetary policy. But there will come a time when interest rates rise."

Market participants will likely observe the Trade Balance data with Import and Export figures for January on Wednesday. Furthermore, the focus will shift to the Federal Open Market Committee’s (FOMC) meeting minutes.

• USD/JPY rebounds to 150.32 on the firmer US dollar in Tuesday’s early Asian session. 
• Finance Minister Shunichi Suzuki said he was more concerned about the negative aspects of a weak currency.
• Investors anticipate the first 25 basis points (bps) rate cut in 2024 as early as June.

The USD/JPY pair holds above the 150.00 psychological mark during the early Asian trading hours on Tuesday. The pair edges higher on the day due to the renewed US Dollar (USD) demand. Meanwhile, which tracks six major currencies to gauge the USD’s value, recovers to 104.35. USD/JPY currently trades near 150.32, up 0.12% on the day. 

With inflation exceeding its 2% target over a year, the Bank of Japan (BoJ) has signaled that it will end its negative interest rate policy in the coming months. BoJ Governor Kazuo Ueda said on Friday that the central bank will examine whether to maintain various easing measures, including a negative interest rate, when sustained, stable achievement of the price target comes into sight.

The upside of the USD/JPY pair might be capped due to the verbal intervention from the Japanese authorities. Finance Minister Shunichi Suzuki said that while a weak Yen has merits and demerits, he was more concerned about the negative aspects of a weak currency.

On the other hand, Federal Reserve (Fed) Chair Jerome Powell has pushed back against the expectation of interest rate cuts, and investors expect the first 25 basis points (bps) rate cut in 2024 as early as June. The FOMC Minutes on Wednesday might offer some hints about further monetary policy, given recent signs of stubborn inflationary pressures.

Moving on, Japan’s Trade Balance will be due on Wednesday ahead of the FOMC Meeting Minutes. Traders will also focus on the Fed's Bostic and Bowman speech. On Thursday, the preliminary Japanese Jibun Bank PMI for February will be released. 

• USD/JPY at 150.13, stabilizing amid quiet trading from the US holiday.
• Bulls aim for a break above 150.88 year-to-date high, targeting 151.91+.
• Decline below 150.00 may prompt tests of lower support, as technicals suggest crucial markers.

The USD/JPY traded sideways during a choppy trading session late on Monday, with Wall Street remaining closed in observance of President’s Day. At the time of writing, the pair exchanges hands at 150.13, flat.

From a technical perspective, the USD/JPY is neutral to upward biased, but it seems to have peaked at around the 150.00 area as Japanese authorities threatened to intervene in the Forex markets. Nevertheless, bulls remain in charge, and if they push the exchange rate above the current year-to-date (YTD) high of 150.88, that will exacerbate a rally above the 151.00 figure, with buyers targeting the 2023 high at 151.91. A breach of the latter will expose the 152.00 mark.

On the flip side, if sellers drag the exchange rate below 150.00, look for a dip lower, initially to the Tenkan-Sen at 149.25. Once cleared. The next stop would be the Senkou Span A at 148.57, followed by the Kijun-Sen at 147.88.

USD/JPY Price Action – Daily Chart

• USD/JPY falls to near 150.00 as USD Index remains under pressure.
• Traders pare Fed rate cut bets for May amid stubborn inflation data.
• The BoJ may postpone plans for exiting its dovish policy stance amid dismal economic growth.

The USD/JPY drops to near the psychological support of 150.00 in Monday’s European session. The asset has faced selling pressure due to further decline in the US Dollar Index (DXY). The USD Index, which tracks six major currencies to gauge Greenback’s value, has dropped to near 104.20.

S&P500 futures remain subdued in the London session amid an extended weekend due to the holiday in US markets because of Presidents’ Day. Meanwhile, 10-year US Treasury yields have rebounded to 4.31%, prompted by the hotter-than-expected Producer Price Index (PPI) and the consumer price inflation data for January.

While market participants have pared bets in favor of rate cuts in the May monetary policy meeting by the Federal Reserve (Fed), policymakers consider the surprisingly higher data as a one-time blip whose consideration could be a tremendous mistake. The broader inflation trend is declining, which should be mainly in focus.

Going forward, market participants will focus on the Federal Reserve (Fed) Open Market Committee (FOMC) minutes for the January policy meeting, which will be released on Wednesday. The FOMC minutes will provide the detailed reasoning behind maintaining the status-quo and a fresh outlook on interest rates.

Meanwhile, the Japanese Yen has been underpinned against the US Dollar, although investors have dialed back expectations for the unwinding of the expansionary monetary policy stance by the Bank of Japan (BoJ). The Japanese economy has entered a technical recession, which would force BoJ policymakers to continue with plans of expanding stimulus to support economic growth.

On the economic data front, investors await the preliminary Jibun Bank Manufacturing and Services PMI for February, which will be published on Tuesday.

Last week, USD/JPY moved back above the 150.00 level for the first time since November. Economists at MUFG Bank analyze the pair’s outlook.

GDP data if anything could encourage intervention