Daily Price Outlook
The USD/JPY pair has been showing signs of weakness in recent session, trading below 157.20 level.
One of the main reasons behind this downward trend is the shifting market expectations regarding the Federal Reserve's (Fed) interest rate decisions.
Earlier, the market believed that the Fed might continue to cut interest rates, which weakened the US dollar (USD) and provided some strength to the Japanese yen (JPY).
However, the current situation is different. There is a growing expectation that the Fed might take a more cautious approach with rate cuts in the future, leading to a mixed outlook for the USD/JPY pair.
In addition to this, market participants are also closely watching global economic developments, particularly in the US.
The slowing down of global growth and geopolitical tensions may weigh on market sentiment, affecting the performance of both the USD and JPY.
Despite the Fed's more hawkish stance, the pair's movement remains subdued, indicating a delicate balance between the two currencies.
US Dollar Strengthens Against Japanese Yen Amid Fed's Cautious Rate Cut Approach
On the US front, the broad-based US dollar has been gaining strength recently, which has provided support to the USD/JPY pair.
The recent bet on fewer interest rate cuts by the Federal Reserve this year has driven the USD higher against the Japanese yen.
The Federal Reserve's cautious approach to rate cuts has kept the US dollar elevated, despite some concerns about inflation and economic growth.
The anticipation of the US keeping interest rates higher for longer is a key factor in strengthening the USD.
Furthermore, the possibility of inflationary pressures stemming from proposals such as tariffs could also keep the Fed from making aggressive cuts in rates.
This higher interest rate difference between the US and Japan continues to provide support for the USD/JPY pair, driving the pair toward levels around 157.30.
Japanese Yen Faces Pressure Amid Gradual Economic Recovery and BOJ's Accommodative Policies
On the other side, the Japanese yen is facing pressure due to Japan’s ongoing economic situation. Recently, Bank of Japan (BOJ) Governor Kazuo Ueda mentioned that Japan is moving closer to achieving its 2% inflation target.
This has led to optimism in the market about Japan’s economic recovery. However, the progress toward this inflation target is still gradual, and the BOJ’s policies remain accommodative.
As a result, the JPY is finding it difficult to gain significant strength against the USD. The Japanese authorities are closely monitoring the exchange rate movements, with verbal interventions from officials like Finance Minister Katsunobu Kato, who has suggested that Japan may take measures to combat excessive currency movements. Such interventions aim to limit the yen’s losses, but their effectiveness remains to be seen.
USD/JPY – Technical Analysis
USD/JPY is trading at 156.743, down 0.36% in the last session, reflecting continued selling pressure. On the 4-hour chart, the pivot point is positioned at 157.401, serving as a critical level for directional movement.
Immediate resistance is noted at 158.065, followed by stronger hurdles at 158.742 and 159.672. On the downside, key support levels are seen at 155.965, 155.004, and 154.152, offering protection against deeper declines.
The Relative Strength Index (RSI) at 40 signals bearish momentum but suggests the pair is approaching oversold territory, which may limit further downside in the short term. The 50 EMA at 157.404 indicates that USD/JPY is trading below its short-term trend, reinforcing a bearish outlook.
A break below the immediate support at 155.965 could accelerate selling pressure toward 155.004. Conversely, a move above the pivot point at 157.401 may attract buyers, targeting resistance at 158.065.
Overall, the pair’s trajectory remains influenced by technical levels, with a cautious approach advised near the pivot. Traders should watch for decisive moves either above 157.401 for bullish momentum or below 155.965 for further declines.
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