Daily Price Outlook
During the European session on Thursday, the USD/JPY currency pair extended its downward trend, trading below the 150.20 level. However, the Japanese Yen (JPY) gained strength as expectations for further interest rate hikes by the Bank of Japan (BoJ) continued to rise.
This sentiment was reinforced by the surge in Japanese government bond (JGB) yields, which reached their highest levels in over a decade, narrowing the rate differential with other major economies and boosting demand for the Yen.
Apart from this, a wave of risk aversion swept through global markets following former US President Donald Trump's renewed tariff threats. This further supported the safe-haven JPY, leading to increased selling pressure on the USD/JPY pair.
Meanwhile, the US Dollar (USD) faced some weakness despite the Federal Reserve's (Fed) hawkish stance, which could provide support to the pair in the near term.
BoJ Policy Outlook, Wage Growth, and US Trade Tensions Boost Yen Strength
On the Japanese economic front, BoJ board member Hajime Takata emphasized on Wednesday that Japan's real interest rates remain deeply negative.
He also suggested that the central bank may need to adjust its monetary policy further if economic forecasts hold, strengthening the case for additional rate hikes.
This follows Japan’s robust Q4 Gross Domestic Product (GDP) data released earlier in the week, reinforcing expectations of BoJ tightening.
However, the Reuters poll indicated that over 65% of economists anticipate the BoJ raising its key interest rate to 0.75% in the third quarter. Besides, labor negotiations are expected to result in a wage increase of 5.00%, up from the previous forecast of 4.75%.
The yield on Japan’s benchmark 10-year JGB surged to its highest level since November 2009, further bolstering the Yen’s strength.
At the same time, US trade policy developments also played a key role in influencing market sentiment. Trump’s statement on Wednesday about imposing new tariffs next month or sooner raised fears of a global trade war, driving investors toward safe-haven assets such as the JPY.
In response, Japan's Trade Minister Yoji Muto is reportedly planning a visit to the US in March to seek exemptions from potential tariffs on steel and automobiles.
Fed Caution on Rate Cuts Keeps USD Under Pressure
From the US perspective, the Federal Reserve’s January FOMC meeting minutes released on Wednesday showed policymakers expressing caution about future rate cuts.
Fed Vice Chairman Philip Jefferson highlighted the resilience of the US economy, strong labor market conditions, and persistent inflationary pressures.
Chicago Fed President Austan Goolsbee echoed these sentiments, stating that while inflation has eased, it remains too high for the Fed to consider immediate rate cuts.
Looking ahead, market participants will closely monitor upcoming US economic data, including Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index, as well as speeches from key Fed officials.
These factors will likely influence the USD/JPY pair’s next moves, though for now, the Yen remains in control amid growing expectations of BoJ tightening and global risk-off sentiment.
USD/JPY – Technical Analysis
USD/JPY is trading at 150.382, down by 0.02%, reflecting a cautious bearish sentiment. The pair is currently trading below the pivotal level of 151.024, signaling potential downward pressure. The 50-day Exponential Moving Average (EMA) at 152.34 is acting as dynamic resistance, reinforcing the bearish outlook.
Immediate resistance is located at 152.329, followed by 153.242 and 154.684. A breakout above 152.329 would invalidate the bearish scenario, paving the way for a bullish reversal towards higher resistance levels.
On the downside, initial support lies at 149.621, with further safety nets at 148.650 and 147.760. A break below 149.621 would confirm bearish momentum, potentially accelerating selling pressure towards the lower support zones. The current price action suggests a consolidation phase, with traders awaiting a decisive breakout for directional clarity.
From a technical perspective, the bearish case is supported by the descending trendline and the 50-day EMA acting as a resistance barrier. However, a reversal above 151.024 would shift the momentum to bullish, invalidating the short-term bearish outlook.
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