Daily Price Outlook
During the European trading session, the USD/JPY currency pair has recently faced some selling pressure but managed to regained its strength around 152.80 level as Japanese Yen (JPY) started to lose some of its recent gains, largely due to fears that Japan could also fall victim to US trade tariffs under President Donald Trump's policies.
This, combined with a risk-on market sentiment, has pushed the Yen lower. Moreover, a slight rebound in the US Dollar (USD) from a one-week low helped lift the USD/JPY pair back above the mid-153.00s range.
Japan's Economic Data and BoJ Policy Impact
The Japanese economy has recently shown signs of strength, with data released on Wednesday indicating an increase in real wages, further reinforcing expectations that the BoJ will hike interest rates.
This outlook is supported by comments from Japan's Finance Minister, Katsunobu Kato, who highlighted inflationary pressures, even though the country has not yet fully emerged from deflation.
Adding fuel to these expectations, BoJ Board Member Tamura Naoki endorsed the idea of faster interest rate hikes, suggesting a potential increase to around 1% by the latter half of fiscal 2025.
Market participants are currently pricing in a 94.8% chance that the BoJ will raise interest rates by 0.25% at its September monetary policy meeting. This would position Japan’s monetary policy tighter relative to the US, making the Yen more attractive as an investment.
Fed's Easing Bias and USD/JPY Price Action
In contrast, the US economic data has raised concerns about the health of the labor market, contributing to expectations of interest rate cuts by the Federal Reserve.
Recent figures, including the Job Openings and Labor Turnover Survey (JOLTS), showed a decline in job openings, which, along with a soft Services PMI report, suggests the US economy may be slowing down.
This has led to a pullback in US Treasury yields and a weakening of the US Dollar, which in turn pressured the USD/JPY pair.
Fed Vice Chair Philip Jefferson stated that the Fed is content with holding interest rates steady, as the central bank waits to assess the long-term impact of US trade policies. This dovish stance supports the view that the USD may struggle to appreciate in the face of growing concerns about US economic conditions.
Geopolitical Risks and Market Sentiment
Apart from this, the current risk-on market mood is another factor weighing on the Japanese Yen. Investors appear to be less focused on the Yen's safe-haven appeal, as they are more optimistic about global economic growth, particularly in the US. This has led to increased demand for riskier assets and a pullback in JPY demand.
Moving ahead, the focus will remain on the upcoming US economic data, particularly the highly anticipated Nonfarm Payrolls (NFP) report on Friday.
Hence, the stronger-than-expected employment report could provide some support to the USD, while a weaker report would likely further dampen USD prospects, keeping the pressure on the USD/JPY pair.
USD/JPY – Technical Analysis
USD/JPY is trading at 152.415, down 0.11%, as the pair remains in a corrective phase after failing to sustain momentum above key resistance levels. Price action is hovering below the pivot point at 153.203, signaling continued pressure from sellers in the short term. A decisive move above this level is necessary to confirm a bullish reversal.
Immediate resistance is seen at 153.210, followed by 154.178 and 155.333, which could act as barriers to further gains. The 50-day Exponential Moving Average (EMA) at 154.605 reinforces resistance, making a sustained break above this region crucial for renewed upside potential.
On the downside, immediate support lies at 151.087, with further levels at 150.407 and 149.771. If USD/JPY slips below 151.087, a deeper pullback could take shape, testing the lower support zones. However, the market remains in an overall uptrend, and dips toward support levels may present buying opportunities.
Given the current structure, a buy position above 151.828 is preferred, with a take profit target at 153.203 and a stop loss at 151.093 to manage risk effectively. A successful break above resistance could trigger a move toward higher targets, while a failure to hold above support may shift sentiment further bearish.
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