CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• The USD/JPY extends its uptrend despite verbal intervention from the Minister of Finance. 
• The wide differential between US and Japanese interest rates is seen as a major factor contributing to the rise. 
• The idea that a lot is already priced into the US Dollar could limit USD/JPY upside.

The USD/JPY trades higher on Thursday, rising into the mid 155.00s, on the back of a recent step-rise in US Treasury Bond yields as the pair shrugs off yet more verbal intervention from the Japanese Finance Minister (MOF) Sunichi Suzuki. 

USD/JPY is pressured higher by the wide differential between US and Japanese interest rates, with the US Federal Reserve (Fed) setting the Fed Funds Rate at 5.25% - 5-50% and the Bank of Japan (BoJ) its cash rate at 0.0% - 0.1%. The huge advantage of parking capital in US Dollars (USD) compared to Japanese Yen (JPY) is a constant bullish factor for USD/JPY. 

In a statement to Parliament on Thursday, Sunichi Suzuki reiterated the tired phrase that the Finance Ministry would be “watching FX market closely” and “will take appropriate measures” if the Yen depreciates further. Yet his attempts at verbal intervention seem to be losing force with each repetition as the pair pushed higher regardless. Analysts remain skeptical about the impact even of direct intervention on the pair. 

“Even actual interventions, if they came, would hardly make a lasting impression on the market, because the MOF's firepower is limited,” says Antje Praefcke, FX Analyst at Commerzbank. 

For any lasting effect on the valuation of the Yen, the MOF’s interventions would have to be accompanied by interest rate hikes from the BoJ. 

“..interventions would have to be flanked by a credible monetary policy on the part of the BoJ, i.e. a regular cycle of interest rate hikes, in order to be convincing, otherwise they would just be "leaning against the wind" anyway. However, since we do not believe in a rate hike cycle, we simply lack the arguments for a rising JPY,” says Praefcke. 

BoJ meeting on the radar

Approaching quickly down the road is the next BoJ policy meeting which is scheduled for 3.00 GMT on Friday morning, but the market does not expect a change in policy so soon after the BoJ hiked interest rates in March. At most Ueda and his team are expected to raise their inflation forecasts. 

“The BOJ may raise slightly its 2024 core inflation projections implying greater room to tighten policy and can offer JPY near-term support,” says Brown Brothers Harriman (BBH) in a report. 

Core inflation (ex fresh food) in March tracked at 2.6% versus the 2.4% forecast by the BoJ and “core of core” inflation (ex fresh food and energy) at 2.9% versus the 1.9% forecast by the bank. 

Tokyo Consumer Price Index (CPI) data, released a few hours prior to the BoJ meeting, could impact deliberations, if it varies substantially from consensus. However, the overall view is that the BoJ is unlikely to actually alter policy much given trend inflation remains below its 2.0% target. 

“We are sticking to our view that the BOJ tightening cycle will be modest because underlying inflation in Japan is trending lower. The swap market implies 25 bps of rate hikes in 2024 and 50 bps over the next two years,” says BBH.

US Dollar “already has a lot priced in” – Commerzbank

USD/JPY may be limited in its scope for upside, however, by the fact USD “already has a lot priced in”, according to analysts at Commerzbank. 

This is particularly in regards to the acute shift in market expectations regarding the future course of interest rates in the US.

Since the Federal Reserve’s (Fed) March meeting markets have consistently pushed back the date when the Fed is expected to begin cutting interest rates. 

This recalibration of the future path of interest rates has now been fully priced in, according to Commerzbank’s Praefcke, and in the absence of more catalysts, makes USD more vulnerable to “bad news” than “good news”. 

“..a lot is already priced into the Dollar, such as a soft landing of the economy or a Fed that will only cut the key interest rate much later than previously thought,” says Praefcke. 

“It is becoming increasingly difficult for the Dollar to benefit from facts and figures that underpin this expectation (a delay in future rate cuts); on the contrary, it tends to react sensitively when the market has doubts about its current expectation in the face of not-so-good data. The Dollar is gradually running out of steam, although it is currently the undisputed most popular currency and is likely to remain so,” adds the analyst. 

If her view is valid it could color the FX market reaction to US first quarter GDP data out on Thursday. Even a better-than-expected result may not push USD/JPY that much higher, whilst a weaker-than-expected result could see the pair drop back more substantially.

• US Dollar tips into a fresh 34-year high against Japanese Yen on Wednesday.
• BoJ policy statement is expected as markets await Yen intervention.
• US data sends mixed shocks through markets as Fed watchers look on.

USD/JPY broke into its highest chart territory since June of 1990 on Wednesday, peaking near 155.40 for the first time in 34 years as the Japanese Yen continues to tumble across the broad fx market. According to reporting from Nikkei, the Bank of Japan (BoJ) is expected to discuss “impact of accelerating Yen depreciation”, a clear sign to market participants that BoJ intervention in the fx markets could be impending if the JPY continues to soften.

Key US data is due in the back half of the trading week with US Gross Domestic Product (GDP) and US Personal Consumption Expenditure (PCE) Price Index inflation slated for Thursday and Friday, respectively. US GDP is expected to ease to 2.5% for the annualized first quarter compared to the previous 3.4%. US Core PCE inflation in March is forecast to hold steady in March.

Investors hoping for signs of rate cuts from the US Federal Reserve (Fed) will continue to celebrate downside economic indicators from the US, and will be hoping for slowing GDP growth and easing PCE inflation prints.

The BoJ will be releasing its latest Monetary Policy Statement early Friday, and a press conference from BoJ Governor Kazuo Ueda is expected to follow at an unspecified time. Before the BoJ, Japan’s Tokyo Consumer Price Index (CPI) for the year ended April will print in the early Friday market session. Headline Tokyo YoY CPI is expected to hold steady at 2.6% in April, with Core-core Tokyo CPI inflation (headline inflation less volatile food and energy prices) expected to tick down slightly to 2.7% from 2.9%.

USD/JPY technical outlook

With the pair hitting its highest bids in over three decades, USD/JPY is on pace to close in the green for a fourth consecutive month. The pair is up nearly 6% from the last swing low near 146.50 in March, and USD/JPY has climbed almost 8% since crossing the 200-day Exponential Moving Average (EMA) at the beginning of 2024.

USD/JPY daily chart

• USD/JPY moves higher to 155.00 as US Dollar bounces back.
• Investors await the US Data to get cues about when the Fed will pivot to interest rate cuts.
• The BoJ is projected to raise interest rates only one more time by year-end.

The USD/JPY pair advances to historic highs of 155.00 in Wednesday’s London session. The asset strengthens as the US Dollar finds support amid uncertainty ahead of the United States Q1 Gross Domestic Product (GDP) and the core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Thursday and Friday.

The economic data will significantly influence market expectations about when the Fed will start reducing interest rates.

The market sentiment is asset-specific as S&P 500 futures have added some gains in the European session, while risk-perceived currencies drop against the US Dollar.  The US Dollar Index (DXY) adds some gains after discovering buying interest near 105.70.

On Tuesday, the US Dollar corrected sharply after the S&P Global reported a weak US preliminary PMI report for April. The agency reported that the Manufacturing PMI remains below the 50.0 threshold that indicates a contraction and the Services PMI falls sharply. This has suggested that strong US economic outlook is losing some heat.

In today’s session, investors will keenly watch the Durable Goods Orders for March. Orders for Durable Goods rose by 1.4% in February. Durable Goods Orders include those products that have life span of three years or more. Strong Durable Goods Orders indicate a stubborn inflation outlook.

Meanwhile, the Japanese Yen weakens as investors expect that the Bank of Japan (BoJ) will not continue raising interest rates this week. Last time, the BoJ pushed interest rates to 0%-0.1% after maintaining a super easy monetary policy for 17 years. A Reuters poll showed that the BoJ will tighten policy further once this year and is expected to keep it stable till the June meeting.

Fears of Japan’s intervention in the FX domain to support the sliding Japanese Yen deepen.  In the early European session Senior Japan Ruling Party Executive Ochi said, "There is no broad consensus right now, but if the yen slides further toward 160 or 170 to the dollar, that may be deemed excessive and could prompt policymakers to consider some action" Reuters reported.

• USD/JPY rises to another multi-decade high amidst enthusiasm for the US Dollar. 
• US economic exceptionalism and a massive US Treasury bond sale are fueling USD buying. 
• Japanese Finmin verbal intervention warning is ignored by USD/JPY.  

USD/JPY pulls back a touch after making a new high for April – and the last 34 years – at 154.86 on Tuesday, as the US Dollar (USD) returns to favor amid continued optimism regarding the US economy. 

USD/JPY bulls deaf to Suzuki warning  

USD/JPY rallies despite Japanese Finance Minister Shunichi Suzuki warning the authorities might directly intervene to prop up the Japanese Yen (JPY) on Tuesday. Suzuki said that “the environment” is ripe for currency intervention. In addition, USD/JPY is now well above the historic intervention zone, seen as 150.00-152.00. 

Last week US Treasury Secretary Janet Yellen met with the Finance Ministers of Japan and South Korea and tacitly agreed to allow them to prop up their currencies if necessary, according to Bloomberg News.  

The slight uptick in Japanese preliminary Purchasing Manager Index (PMI) data for April, released on Tuesday, only temporarily slowed USD/JPY’s relentless climb.  

Traders now look to US S&P Global PMIs out at 13.45 GMT, for more information regarding the progress of the US economy. A higher-than-expected result will reinforce the US’s reputation for economic exceptionalism and continue USD/JPY’s uptrend. 

Massive US Treasury bond sale may underpin USD/JPY

The US government is auctioning $180 billion worth of Treasury Notes this week as the US government issues more debt. $180B is a very large amount in such a short space of time – equivalent to a quarterly allocation normally – according to Mark Cranfield of Bloomberg MLIV. 

In addition, the largest ever auction of 2-year US Treasury Notes is taking place on Tuesday. The auctions are likely to lead to higher US Treasury yields and given increased demand from foreign bond buyers, USD buying which could have a bullish impact on USD/JPY, says Cranfield. 

USD/JPY traders prepare for Friday’s BoJ meeting

Bank of Japan (BOJ) Governor Kazuo Ueda noted it was “appropriate to keep easy monetary conditions for now as underlying inflation is still below 2.0%”. Ueda cautioned “If the price trend rises toward 2.0% in line with our outlook…it will mean raising the short-term interest rate,” according to a note by private investment bank Brown Brothers Harriman (BBH).

The Bank of Japan’s (BoJ) April policy meeting takes place on Friday. It is unlikely the BoJ will increase interest rates at the meeting but there is a chance it may reduce Japanese Government Bonds (JGB), which would be viewed as hawkish, JPY positive, and bearish for USD/JPY.  

If the BoJ delivers a hawkish hold on Friday it is unlikely the Japanese authorities will intervene to prop up the Yen, according to BBH. 

“The BOJ is widely expected to keep the policy rate target at 0 to 0.10%. However, the BOJ may raise slightly its 2024 core inflation projections implying greater room to tighten policy. Indeed, Japan’s April Jibun Bank Flash Composite PMI shows private sector growth quickening at the fastest pace in eight months and price pressures intensifying,” says BBH. 

Data on the horizon

US data could further impact USD/JPY volatility during the week, with GDP on Thursday and Core Personal Consumptions – Price Index data on Friday. 

In Japan, the Statistics Bureau of Japan will release the Tokyo Consumer Price Index just hours before Friday’s BoJ meeting. 

• The US Dollar maintains a bid tone and is testing 154.78 high.
• The Yen remains weighed by interest rate differentials between the Fed and the BoJ.
• Friday’s BoJ momentary policy statement might give a fresh impulse to the Yen.

Nothing stops the US Dollar. Neither the moderate risk appetite seen on Monday nor the reiterated intervention warnings by diverse economic authorities, the Yen remains pinned to long-term lows near 155.00.

The pair extended its recovery on Monday, following a spike lower last week, following news of the Israeli attack on Iran. Tehran downplayed the event, suggesting its will to avoid a direct confrontation with Tel Aviv, which the market has welcomed.

This has failed to give some oxygen to a battered Yen, which is struggling on carry trade dynamics. The widening yield differential between the Yen and most of the major currencies encourages speculators to borrow JPY and exchange for higher-yielding assets elsewhere.

Adverse interest rate differentials are weighing on the JPY

Last week, an unusual joint statement from the US, Japanese, and South Korean authorities pledged to act against excessive currency volatility. This had an immediate easing impact on the US Dollar, which seems to have faded on Monday.

Yen's weakness helps Japanese exporters to sell their products on foreign markets but makes imports more expensive in the domestic ones. This has an inflationary impact on prices and forces the BoJ to accelerate its normalization pace. The Japanese central bank meets on Friday, after the release of the anticipated Tokyo CPI figures. Any hint on that lion at the bank’s statement might give some fresh impulse to the Yen.

In the US, the focus will be on Thursday’s first-quarter GDP figures and Friday’s PCE Prices Index data. This is the Fed’s gauge of choice to assess inflationary trends and might set the US Dollar’s near-term direction.

• USD/JPY inches towards April high as Japanese Yen loses safe-haven appeal amidst easing Middle East tensions.
• Geopolitical risks have not gone away completely, new Omicron variant an outside threat. 
• Friday is likely to be a big day for USD/JPY with the BoJ meeting and US PCE inflation data. 

The USD/JPY inches back up towards the April highs at 154.79 on Monday after a de-escalation in Middle East tensions reduces safe-haven flows to the Japanese Yen (JPY). This affects the JPY more than the US Dollar (USD), despite both holding safe-haven status.

The conflict between Israel and Iran has not escalated in the way markets feared. After Israel’s one-off attack on a military base outside Isfahan on Friday, Iran has not counter-attacked. As a major safe-haven, the JPY has seen demand fall and continues its long-term trend of depreciating against USD. 

USD/JPY at risk from risk

Although hostilities in the Middle East have temporarily subsided, the threat of outbreaks in the future are an ever present risk. 

Geopolitical risks have not completely dissipated and a division appears to be opening up in the world between the West and what Gideon Rachman, Chief Foreign Affairs Commentator for the Financial Times, calls an “axis of adversaries”. These include Russia, Iran, North Korea and China.  

Rachman points out that the military base outside Isfahan targeted by the Israelis in Friday’s attack, is in fact, a nuclear enrichment site which utilizes Chinese-supplied reactor technology.

A further outbreak of hostilities or general ratcheting up of geopolitical risk factors is likely to see safe-havens like the JPY rise, with bearish implications for USD/JPY. 

War is not the only potential source of geopolitical risk that could pressure USD/JPY. Reports of a fresh strain of the Omicron variant of the Covid-19 virus have also destabilized markets at the start of the new week. 

“While the WHO is urging caution, it noted that symptoms linked to the new strain so far have been mild.  Because it will take some time to determine the likely impact on the global economy, we believe risk aversion will continue this week,” say analysts at private investment bank Brown Brothers Harriman in a note on Monday. 

A handful of countries have already introduced minor social distancing measures, but if the strain begins to spread and pose a more serious health risk, this could present a fresh risk factor for investors, leading to a steady stream of funds into safe-havens, favoring the Japanese Yen above all. 

USD/JPY traders could come out on Friday 

Friday April 26 stands out as a big day for USD/JPY as it is then that the Bank of Japan (BoJ) will hold its April policy meeting and the US will publish Personal Consumption Expenditure (PCE) data for March, including the Federal Reserve’s (Fed) preferred gauge of inflation, the Personal Consumption Expenditure – Price Index. 

If PCE inflation in the United States (US) registers a higher-than-expected rise it will boost USD/JPY, by suggesting an even longer delay before the Fed reduces interest rates. If interest rates remain higher for longer it increases demand for USD from foreign investors looking to park their capital. 

Likewise if the BoJ increases interest rates at its meeting or drops clues it intends to in the near future, the JPY will appreciate (pushing down USD/JPY). 

BoJ unlikely to raise interest rates, chance of policy tweak

Amongst institutional analysts the consensus expectation is that the BoJ will not raise interest rates until October. 

“We expect the Bank of Japan to keep its short-term rate target unchanged (range 0-0.1%), after hiking the policy rate for the first time in 17 years in March. Going forward, we expect the BoJ to keep a modest, gradual hiking path,” said ABN Amro. 

Deutsche Bank sees a risk the BoJ will “remove its JGB purchasing guidelines from its statement or revise them to make its purchasing operations more flexible,” – a move which could support the Yen. 

Despite seeing another hike as unlikely, many Japanese officals think the US Dollar’s recent ascent has gone too far and something needs to be done to support the Yen. 

“Ongoing yen weakness (partly driven by the pricing out of Fed rate cuts) means that there is an increasing probability that the BoJ may consider to come with the next rate hike earlier than the current consensus expectation of October 2024 (as indicated by market pricing),” says ABN Amro, adding that against this backdrop, Governor Ueda may try to verbally intervene by dropping clues about future tightening. 

Last week, the finance ministers of both Japan and South Korea acknowledged “serious concerns about the recent sharp depreciation of the Japanese Yen and the Korean Won.” The Bank of Indonesia went further and intervened to stabilize its slumping currency, according to analysts at Brown Brothers Harriman (BBH). 

USD impregnability? “It’s hard to find reasons to bet against..USD”

The US Dollar is currently basking in the glory of an almost bullet-proof US economy. Apart from PCE inflation data on Friday, proof of further US economic success could come in other macro data out on Tuesday and Wednesday. 

“Overall, as long as US economic activity remains solid, the cyclical USD uptrend is intact. The US preliminary April PIs (Tuesday), Q1 GDP (Thursday) and March Personal Income and Outlays report (Friday) are expected to back American economic exceptionalism,” says BBH in a note on Monday. 

USD/JPY bears could be facing an uphill struggle given the US Dollar’s perceived impregnability. 

“It is hard to find any reasons to bet against the Dollar,” said Michael Pfister, FX Analyst at Commerzbank in an interview with Bloomberg News. “We have seen an appreciation in the Greenback over the last two weeks on the back of an inflation surprise. On top of that we have a strong growth advantage and a very hawkish Fed,” added the analyst. 

On Friday the trend of Federal Reserve members becoming more cagey about when they might start cutting interest rates gained further momentum. Chicago Fed President Austan Goolsbee hinted at a longer timeline for interest rate cuts as progress on inflation had “stalled”, adding inflation has significantly dropped from its pandemic-era peak of 9.1%, but remains stubbornly above the Fed’s target. Meanwhile, Atlanta Fed President Raphael Bostic noted that the US central bank wouldn’t cut rates until the end of the year, according to Lallalit Srijandorn, an Editor at FXStreet.

• USD/JPY recovers after hitting a four-day low, as Tehran’s non-retaliatory stance calms market fears.
• Consolidation near 155.00 under scrutiny, with Japanese officials wary of excessive forex volatility.
• Technical levels to watch: support at Tenkan-Sen 153.18, with further supports at 152.29 and 151.41.

The USD/JPY consolidated at around the 154.60s area on Friday after diving to a four-day low of 153.59, courtesy of heightened geopolitical tensions spurred by the escalation of the Israel-Iran conflict. Nevertheless, Tehran downplayed the attacks, adding they don’t plan to retaliate. That eased off pressure on the financial markets, as witnessed by the correction in the major. The pair trades at 154.62, virtually unchanged.

USD/JPY Price Analysis: Technical outlook

The daily chart portrays the pair consolidated at around peak highs, shy of the 155.00 psychological figure. Japanese authorities jawboning about desirable, orderly moves in the Forex markets keep buyers nervous about pushing the USD/JPY past 155.00. However, once breached, if authorities would not intervene, that would expose the August 1990 high of 155.78, followed by the April 1990 high at 160.32.

Otherwise, if sellers stepped in and pushed the exchange rate below 154.00, that would pave the way for a pullback. The first support would be the Tenkan-Sen at 153.18. Further weakness in the USD/JPY would drive prices past the Senkou Span A at 152.29, followed by the Kijun Sen at 151.41. Up next lies the 50-day moving average (DMA) at 150.89.

USD/JPY Price Action – Daily Chart

• USD/JPY whipsaws lower and then higher on alternating risk-on risk-off caused by Middle East tensions. 
• Governor Ueda talks about defending the Yen from further weakness and currency-induced imported inflation. 
• USD/JPY price chart shows bearish Hanging Man forming, boding ill for future price action. 

USD/JPY is trading in the 154.50s on Friday after declining to a low for the day in the 153.00s on the back of a spike in safe-haven demand that disproportionately favored the Japanese Yen (JPY). 

An escalation in Middle East tensions, triggered a flight to safety overnight after news  of bomb explosions in Iran. The attacks were thought to be orchestrated by Israel in retaliation for the drone armada sent by Iran on April 13. 

Although the US Dollar benefited from the flight to safety, JPY gained more from the shift in sentiment, pushing down USD/JPY which expresses the number of Japanese Yen purchasable with one US Dollar. 

The pair subsequently recovered as tensions eased, however, and a senior Iranian official reportedly stated Iran has no immediate plans to retaliate, according to Reuters. 

Inflation ticks lower but Ueda adopts hawkish tone

On the data front, the Japanese National Consumer Price Index (CPI) for March increased by 2.7% year-over-year, compared to a 2.8% rise in February, according to the Japan Statistics Bureau. 

Despite the decline in inflation observed in the data, however, the Governor of the Bank of Japan (BoJ) Kazuo Ueda issued hawkish rhetoric supporting the Japanese Yen. Ueda said the central bank might consider raising interest rates again if significant declines in the Yen caused currency-related inflation, according to Reuters.

Technical Analysis: USD/JPY looks to post bearish Hanging Man pattern

USD/JPY looks like it may be positing a bearish Hanging Man candlestick pattern on Friday (circled) assuming the close does not differ markedly from the current market price. 

If the Hanging Man completes and is followed by a bearish candlestick on Monday it will confirm a short-term bearish reversal pattern and indicate lower prices are likely to follow. 

USD/JPY Daily Chart

A Measured Move price pattern, composed of three waves, commonly labeled A, B and C has been unfolding since the start of March. 

The general rule with these patterns is that the end of wave C can be estimated as occurring  where wave C is equal in length to wave A, or a Fibonacci ratio of wave A. At the very least C normally extends to a 0.618 ratio of A. 

USD/JPY has already reached the conservative estimate for the end of wave C at the Fib. 0.618 extension of A, at 154.20. This means there is a possibility C may have reached its limit and the Measured Move could be complete.

Once the Measured Move completes it is usually followed by a reversal, which in this case means a decline.  

If the end of C equals A, however, it still has higher to go and could reach roughly 156.11. 

The Relative Strength Index (RSI) is in overbought territory, suggesting the risk of a pullback is on the horizon. The advice is for bullish traders with a medium-term outlook to not add to their positions. If RSI exits overbought it may be a sign USD/JPY is pulling back. 

A break above the 154.78 high could indicate a continuation of the uptrend to the next target at the more 156.11 optimistic end of wave C. 

Alternatively, further weakness could lead to a correction back to support at the top of wave A, at 151.96.

• USD/JPY maintains its position around 154.50 after partially recovering its daily losses on Friday.
• Reuters reported that an Iranian official stated there is currently no immediate plan for retaliation against the Israeli airstrikes.
• The Greenback gained traction after Fed officials conveyed hawkish messages on Thursday.

USD/JPY reverses its losses as a senior Iranian official reportedly stated that there is no immediate plan for retaliation against the Israeli missiles strike on Iran on Friday, as per a Reuters report. This has reduced the likelihood of escalating tensions in the Middle East. The pair holds steady around 154.50 during the early European session on Friday.

The Japanese Yen (JPY) strengthened as risk aversion sentiment spread across financial markets following ABC News' report of Israeli missiles striking a site in Iran. Additionally, the JPY received marginal support from the release of Japan's inflation data on Friday. Overall, the Yen's strength exerted pressure on the USD/JPY pair.

The National Consumer Price Index (CPI) for March increased by 2.7% year-over-year, compared to a 2.8% rise in February, according to the latest data from the Japan Statistics Bureau. This index measures the price fluctuations of goods and services purchased by households.

On Thursday, hawkish remarks from Bank of Japan’s (BoJ) Governor Kazuo Ueda supported the JPY. According to a Reuters report, Ueda mentioned in a press conference that the central bank might consider raising interest rates again if significant declines in the Yen substantially boost inflation.

Meanwhile, on the US side, Federal Reserve (Fed) officials conveyed hawkish messages on Thursday, resulting in a surge in US Treasury yields and the US Dollar (USD), which consequently limited the losses of the USD/JPY pair.

Traders are anticipated to closely monitor upcoming speeches from Federal Reserve officials. Atlanta Fed President Raphael Bostic will discuss the US economic outlook at the University of Miami, Florida. Additionally, Chicago Fed President Austan Goolsbee will participate in a moderated Q&A session at the Association for Business Journalists 2024 SABEW Annual Conference in Chicago.

Analysts at Rabobank share a brief outlook for the USD/JPY pair.

BoJ may be able to hike rates again later this year

"Current USD strength is built around the expectation that Fed rates will stay stronger for longer. The greenback has also likely been boosted by safe-haven demand stemming from fears of an escalation of the Middle East crisis. Weaker US data and a reining in of concerns over the Middle East would both be useful in stemming USD strength."

"That said, it is our central view that the USD will remain relatively firm. Alternatively, stronger Japanese economic data and a boost to expectations that the BoJ may be able to hike rates again later this year would lend the JPY some broad-based strength. Earlier today, comments from BoJ dove Noguchi indicated that he was in no rush to hike rates again. That said, assuming that Japanese real household incomes turn positive later this year, we see risk that another BoJ rate hike could follow. This, however, is unlikely for some months. In the meantime, there is strong risk of MoF intervention in an attempt to protect USD/JPY pushing through the 155 area."  

• USD/JPY finds buying interest near 154.00 as investors see Japan’s intervention mere a temporary solution to support weak Japanese Yen.
• Japan’s National CPI data will impact market expectations for BoJ’s rate hikes.
• The US Dollar corrects despite the Fed is expected to keep interest rates higher for a longer period.

The USD/JPY pair recovered intraday losses and rebounds to 154.40 in Thursday’s European session. The asset finds buying interest as investors digest fears of potential Japan’s intervention in the FX domain to support the Japanese Yen from further declining.

Japan’s Vice Finance Minister for International Affairs Masato Kanda said on Wednesday that authorities would not rule out any options in dealing with excessive yen moves, reported Reuters.

Investors see Japan’s stealth intervention in the FX domain a temporary support to the Japanese Yen but this will not solve its fundamental problem. Lack of confidence among market participants over further policy tightening by the Bank of Japan (BoJ) amid doubts over wage growth spiral.

Meanwhile, investors focus on Japan’s National Consumer Price Index (CPI) data for March, which will be published on Friday. The inflation data will significantly influence speculation for the BoJ’s interest rate outlook. Japan’s annual headline CPI and measure excluding fresh foods are estimated to have softened to 2.7% from 2.8% in February. Easing price pressures would negatively impact market expectations for further policy-tightening by the BoJ.

Market sentiment remains upbeat despite Israel's absence of immediate response to Iran’s attack on its territory. S&P 500 futures have posted significant gains in the European session. The US Dollar Index (DXY) corrects sharply to 105.85 despite investors seeing the Federal Reserve (Fed) delaying rate cuts to later this year.

The CME FedWatch tool shows that traders have priced out rate cut expectations for June and July meetings and see the September meeting as the earliest time in which the Fed could begin lowering interest rates.

• USD/JPY continues to decline as the US Dollar correction exerts pressure on the pair.
• Japan's CPI data is scheduled to be released on Friday, expecting a moderation in consumer prices for March.
• US President Joe Biden calls for a tripling of tariffs on Chinese steel and aluminum.

USD/JPY extends its losses for the second successive session, trading around 154.30 during the Asian hours on Thursday. The decline in the US Dollar (USD) exerts pressure on the USD/JPY pair. The Japanese Yen (JPY) might have received support from Japan's trade balance shifting to a surplus in March.

Japan’s Merchandise Trade Balance Total improved to ¥366.5 billion surplus from the previous deficit of ¥377.8 billion. Additionally, the Japanese Yen could have strengthened due to safe-haven inflows, likely prompted by risk aversion amid heightened geopolitical tensions in the Middle East.

US President Joe Biden addressed the American steel industry hub in Pittsburgh on Wednesday, advocating for heightened pressure on the Chinese steel sector. He has urged US Trade Representative Katherine Tai to explore the possibility of tripling the existing 7.5% tariff rate on Chinese steel and aluminum, according to CBS News. This development could potentially benefit the Japanese market and provide support for the Japanese Yen (JPY).

Traders anticipate the release of Japan's National Consumer Price Index (CPI) data by the Statistics Bureau of Japan on Friday, with market expectations leaning towards a moderation in consumer prices for March.

On the other hand, the expectation of the Federal Reserve (Fed) maintaining elevated interest rates for an extended period, supported by a robust US economy and persistent inflation, serves as a counterbalance to the downward pressure on the USD/JPY pair.

Federal Reserve Bank of Cleveland President Loretta Mester addressed on Wednesday, noting that inflation surpasses expectations and that the Fed requires more assurance before confirming the sustainability of 2% inflation. She added that monetary policy is well-positioned, with a potential rate cut if labor market conditions deteriorate.

Additionally, Federal Reserve (Fed) Governor Michelle Bowman remarked that progress in inflation is slowing, potentially stalling altogether. Bowman also mentioned that monetary policy is presently restrictive, and time will determine if it is adequately so.

• USD/JPY extends its uptrend into the 154.00s. 
• It may be forming a Measured Move pattern with an end target of 156.11. 
• RSI is overbought, however, warning a correction may be on the horizon. 

USD/JPY is trading in the upper 154.00s. It has formed what looks like a Measured Move price pattern composed of three waves, commonly labeled A, B and C. 

In the case of Measured Moves, the end of wave C can be reliably predicted because it is often at the point where wave C is equal in length to wave A, or a Fibonacci ratio of wave A. At the very least wave C normally extends to a 0.618 ratio of A. 

USD/JPY Daily Chart

The end of C if it ends equal to A it will reach roughly 156.11 and there is a chance the rally could extend that high. 

However, it is also the case that price has already reached the conservative target for the end of wave C at the Fib. 0.618 extension of A, at 154.20, which means there is a possibility it may have unfolded to its limit. 

In addition, the Relative Strength Index (RSI) is well into overbought territory, recommending bullish traders with a medium-term outlook should not increase their long bets. If RSI exits overbought it may be a sign USD/JPY is pulling back. 

For USD/JPY bulls the important thing is that price itself continues to rise and as long as it does the uptrend is likely to continue.

• USD/JPY maintains its position around the high of 154.78 marked on Tuesday.
• US Dollar strengthens on expectations of the Fed prolonging higher policy rates for a longer duration.
• Japan’s Merchandise Trade Balance Total rose to a surplus of ¥366.5 billion in March, from the previous deficit of ¥377.8 billion.

USD/JPY trades around 154.60 during the early European session on Wednesday, hovering near its peak at 154.78, a level not seen since June 1990. The downward correction in the US Dollar (USD) puts pressure on the USD/JPY pair. However, expectations of the Federal Reserve (Fed) maintaining elevated interest rates for a longer duration, buoyed by a robust US economy and persistent inflation, counterbalance the downward trend in the USD/JPY pair.

Federal Reserve Chair Jerome Powell's remarks on Tuesday at the Washington Forum might have bolstered the greenback. Powell noted that recent data indicates limited progress on inflation this year, suggesting a prolonged period before reaching the 2% target. This commentary possibly contributed to a more hawkish stance and provided support to the US Dollar, as reported by Reuters.

On the other side, the Japanese Yen (JPY) might have found support from the country's trade balance swinging to a surplus in March. The Merchandise Trade Balance Total improved to ¥366.5 billion from the previous deficit of ¥377.8 billion. Additionally, a private survey revealed that sentiment among manufacturers in Japan softened in April due to a weaker Yen driving up import expenses.

Furthermore, the Japanese Yen could see bolstering from safe-haven inflows, likely prompted by risk aversion. Investors are cautiously monitoring Israel's response to Iran's air strike on Saturday. A Reuters report mentioned the postponement of a third meeting of Israel's war cabinet, initially scheduled for Tuesday, to Wednesday, to deliberate on a reaction to Iran's unprecedented direct attack.

Traders eagerly await the release of Japan's National Consumer Price Index (CPI) data by the Statistics Bureau of Japan on Friday. Market expectations point towards a moderation in Consumer Prices in March.

• USD/JPY snaps the two-day winning streak around 154.65 in Wednesday’s early Asian session. 
• Fed’s Powell emphasized that the current level of policy will likely stay in place until inflation gets closer to target.
• BoJ is shifting to a more discretionary policy-setting approach, with less focus on inflation.

The USD/JPY pair trades with mild losses near 154.65 on Wednesday during the early Asian trading hours. The robust US economy and sticky inflation data have triggered the expectation that the Federal Reserve (Fed) might delay the easing cycle to September from June, which provides some support to the US Dollar (USD) against the Japanese Yen (JPY). However, the escalating tensions in the Middle East might boost safe-haven assets like JPY and cap the pair’s upside. 

Data released by the US Census Bureau showed on Tuesday that US Housing Starts fell 14.7% in March from a 12.7% increase in February (revised from 10.7%). The Building Permits declined 4.3% from a 2.3% rise (revised from 1.9%) in the previous reading. Industrial Production came in line with market expectation, rising 0.4% MoM in March from the 0.4% increase in February.

Several Fed officials, including Chairman Jerome Powell, emphasized the data-dependent stance of policy and have not committed to beginning the interest rate cuts. Fed Chair Jerome Powell said the US central bank has not seen inflation come back to the 2% target, indicating that interest rate cuts are unlikely anytime soon.

On the other hand, the Bank of Japan (BoJ) is shifting to a more discretionary approach in setting policy, with less emphasis on inflation. This, in turn, continues to weigh on the JPY and create a tailwind for the USD/JPY pair. Investors will take more cues from the BOJ's fresh quarterly growth and price projections due at its April 25–26 policy meeting, for fresh impetus. 

Meanwhile, the geopolitical tensions in the Middle East might lift the JPY and limit the upside of the USD/JPY pair. Late Tuesday, National Security Advisor Jake Sullivan said in a statement that new sanctions targeting Iran and sanctions against entities supporting the Islamic Revolutionary Guard Corps and Iran's Defense Ministry will be imposed in the coming days. Sullivan stated that the White House will not hesitate to continue to take action against the Iranian government. Tensions between Israel and Iran escalated after an attack on the Iranian embassy in Syria earlier this month, which killed two senior Iranian Revolutionary Guard Corps leaders. Iran blamed Israel for the attack, but Israel did not claim responsibility.

• USD/JPY rises propelled by strong US retail data strengthening the Dollar against the Yen.
• US housing indicators falter as Building Permits and Housing Starts underperform, hinting at a construction sector slowdown.
• US Industrial Production remains stable, underlining a mixed yet resilient economic backdrop.
• Japan's Finance Minister Suzuki stresses vigilant Forex market monitoring.

The US Dollar clocks gains versus the Japanese Yen in early trading during the North American session. Strong economic data from the United States (US) and neutral to hawkish comments by US Federal Reserve officials boost the Greenback. The USD/JPY trades at 154.61, 0.22% above its opening price.

USD/JPY moves past 154.00 amidst strong retail sales data and hawkish Fed commentary

US housing data was weaker, revealing that builders may be taking a breather with the high level of inventory. Building Permits in March decreased by 4.3%, with figures dipping to 1.458 million, less than the 1.514 million estimates and February’s 1.523 million. Consequently, Housing Starts plunged -14.7%, from 1.549 million to 1.321 million, below forecasts of 1.48 million.

Other data revealed by the US Federal Reserve (Fed) showed that Industrial Production in March remained unchanged at 0.4% MoM.

Despite that, Monday’s strong Retail Sales data sparked a reaction in the fixed-income market, with US Treasury yields having been rising more than 10 basis points during the week. Traders had trimmed their bets that the Fed might cut rates twice instead of three times, as the Chicago Board of Trade (CBOT) data depicted. The Fed is expected to drive the main reference rate to 4.965% towards the end of 2024.

On Monday, San Francisco Fed President Mary Daly said the US central bank is in no rush to ease policy. Meanwhile, USD/JPY traders await speeches by Fed’s Governor Jefferson, New York Fed John Williams, and Chair Jerome Powell.

According to Finance Minister Suzuki, Japanese authorities have remained vocal about “closely monitoring the latest developments” in the Forex market. Market participants had pushed the exchange rate past the 154.00 threshold, and no reaction by the Bank of Japan (BoJ) or the MoF might keep the rally alive.

USD/JPY Price Analysis: Technical outlook

 The major remains upward biased, and with no clear signs of intervention, USD/JPY buyers might drive the exchange rate to challenge 155.00. Once cleared, the next stop would be 155.78, followed by the latest cycle high at 160.32. On the flip side, if the pair drops below 154.00, that could open the door for a pullback to April’s 12 high turned support at 153.38 before dropping to 153.00.

• USD/JPY continues its ascent, breaking past 154.00, driven by strong US economic data and risk aversion from Middle East tensions.
• March's robust US Retail Sales highlight ongoing consumer strength, pushing up US Treasury yields.
• Japanese officials voice worries over swift currency fluctuations, staying in close contact with global partners on financial and FX market developments.

The US Dollar extended its gains versus the Japanese Yen in early trading in the North American session, climbing above the 154.00 figure, although Japanese officials remain wary of the fast advance of the currency. Nevertheless, the USD/JPY exchanges hand at 154.37, up by 0.71, refreshing 34-year highs.

US Dollar strengthens against Yen, despite verbal intervention by Japanese officials

Over the weekend, developments in the Middle East spurred risk aversion in the financial markets. Due to remaining closed, Bitcoin was the main loser, though it has trimmed some of the pain inflicted on risk appetite. Iran’s offensive against Israel finished without casualties, though Tehran made its point that they would not remain arms crossed if Israel escalated the conflict.

According to Bloomberg, some US officials speaking anonymously said that the White House is urging Israel against retaliation.

Aside from these developments, economic data from the United States (US) sponsored the USD/JPY last leg-up, though it remains shy of cracking the 150.00 mark.

 The US Department of Labor revealed that Retail Sales in March rose by 0.7% MoM, above expectations of 0.4%. This shows an increase of 2.1% in Q1 2024 compared to last year's first quarter, an indication of consumers' strength.

Following the data, US Treasury yields are skyrocketing, with the short and long end of the curve rising more than 10 basis points (bps).

Fed’s Williams look for cuts in 2024

In the meantime, New York Fed President John Williams said that his baseline scenario projects rate cuts “will likely start this year.” He thinks the policy is restrictive, adding that strong fundamentals are driving consumer spending.

On the Japanese front, officials remain vocal, emphasizing that fast Forex moves are undesirable and should reflect fundamentals. Recently, a Senior Japan MoF Official said they’re in frequent and regular talks with the US and other countries' authorities on financial and FX market moves.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY rally might continue if not for Japanese authorities jawboning, capping the uptrend. If the pair remains bid, it could test 155.00, seen as the line of the sand that might increase tension in the major, and it could trigger intervention by authorities. Conversely, if USD/JPY dips below 154.00, look for a test of the April 12 high turned support at 153.39, followed by the 153.00 mark.

• The UoM Sentiment Index slipped to 77.9, indicating a weakening in US consumer confidence.
• The US Dollar seems to consolidate weekly gains following hot inflation data.
• The Greenback will close a 1.60% winning week.

The USD/JPY pair, currently trading at 152.95 with a modest loss of 0.17%. Despite a drop in consumer confidence in the US, indicated by the University of Michigan's (UoM) Consumer Sentiment Index the Greenback will close a winning week, on the back of hot inflation data reported on Wednesday and Thursday.

Consumer confidence in the US weakened in early April, with the  UoM's Consumer Sentiment Index edging lower to 77.9 from 79.4 in March. This reading came in below the market expectation of 79. The Current Conditions Index declined to 79.3 from 82.5 and the Consumer Expectations Index fell to 77 from 77.4. The details of the survey also revealed that the one-year inflation outlook climbed to 3.1% from 2.9% in April, while the five-year inflation outlook rose to 3% from 2.8%.

That being said, the US Bureau of Labor Statistics revealed a rise in inflation this week, with the Consumer Price Index (CPI), rising to 3.5% year-over-year in March, up from February's 3.2%. The core CPI, also increased to 3.8% Yoy, matching February's level. In that sense, hot inflation figures fueled a sharp rise in hawkish bets on the Federal Reserve (Fed) and in the US Treasury yields which benefited the USD during the week. As for now, markets seem to have given up on the hopes of a June rate cut and if data validated those bets, the USD may see further upside. Next Monday, the US will release Retail Sales figures from March.

USD/JPY technical analysis

On the daily chart, the USD/JPY pair reveals a sustained trend in positive territory on the Relative Strength Index (RSI). Even with the slight decrease observed back below 70, the dominant trend is bullish and buyers just seem to be correcting overbought conditions. Simultaneously, a reading of green bars on the Moving Average Convergence Divergence (MACD) histogram consolidates the buying momentum thesis.

USD/JPY daily chart

On examining the broader outlook, the USD/JPY reveals a bullish posture. The pair's position above the 20-day, 100-day, and 200-day Simple Moving Average (SMA) portrays a positive short-term and long-term trend.

• USD/JPY edges up to 153.22, lifted by inflation reports and rising DXY.
• US PPI data indicates slower inflation growth yet fails to dampen the bullish momentum for the US Dollar.
• Fed officials express disappointment in inflation trends, highlighting ongoing economic challenges.

The USD/JPY climbed during the North American session and remains above the 153.00 figure despite Japanese authorities jawboning on excessive Japanese Yen (JPY) movements. Further data from the United States (US) depicts inflation is stickier than expected, putting pressure on the Federal Reserve. At the time of writing, the major trade at 153.22, up 0.05%.

Despite Japanese interventions warnings, USD/JPY edges higher as stickier US inflation data fuels USD strength

The Greenback is strengthening across the board, as the US Dollar Index (DXY) rises to its highest level since November 2023. The DXY is up at 105.51, shy of testing the next resistance seen at 106.06. Wednesday’s inflation report sponsored the buck’s reaction. Meanwhile, the recently revealed Producer Price Index (PPI) was softer compared to CPI, though it failed to weigh on the US Dollar.

The US Department of Labor revealed that PPI in March slowed more than expected, coming at 0.2% MoM, below estimates of 0.3%. Annually-based figures witnessed the PPI rising by 2.1%, lower than projected by surpassing February’s 1.6%, while the core PPI stood at 2.4%, also above estimates and the previous month's data.

Given that US economic data suggests that the Federal Reserve’s job is not done, further US Dollar strength is seen, in the near term. Also, US Treasury yields on Wednesday, climbed more than 20 basis points along the whole yield curve, boosting the prospects of the American currency.

In the meantime, Federal Reserve officials continued to cross the wires. New York Fed President John Williams commented that recent inflation data has been disappointing, adding that the economic outlook is uncertain. Recently, Richmond’s Fed Thomas Barkin added that the latest inflation data does not increase confidence that disinflation is spreading in the economy, raising the question of whether we (the Fed) are seeing a shift.

On the Japanese front, Finance Minister Suzuki said that authorities wouldn’t rule out any steps to deal with excessive volatility in the Yen. He added, “We are looking with a high sense of urgency.”

USD/JPY Price Analysis: Technical outlook

Given the fact the USD/JPY has broken the 153.00 barrier, the next resistance level would be the June 1990 monthly high at 155.78, followed by the April 1990 pivot high at 160.32. On the other hand, the risks of intervention could tumble the pair toward the next key support levels. Firstly, the Tenkan-Sen at 152.05, followed by the Senkou Span A at 150.97, the Kijun-Sen at 149.89, closely followed by the Senkou Span B at 149.59.