CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• 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.

• USD/JPY trades softer to 153.00 after reaching the July 1990 tops on Thursday. 
• The US CPI inflation rose more than expected in March, triggering the Fed to delay rate cuts this year. 
• The potential FX intervention from the BoJ might provide some support to the JPY. 

The USD/JPY pair trades on a weaker note near 153.00 after retreating from the highest level since July 1990, nearly 153.24, on Thursday during the early Asian session. The uptick of the pair is supported by the upbeat US Consumer Price Index (CPI) data for March, which triggered investors to scale back bets on US interest rate cuts this year.

The US CPI inflation rose more than expected in March. The headline CPI figure rose 0.4% MoM in March, compared with the 0.3% increase expected. On a year-on-year basis, the CPI increased 3.5% YoY versus forecasts of a 3.4% rise, the Labor Department reported on Wednesday. 

The Core CPI figure, excluding the volatile food and energy components, grew 0.4% MoM in March, compared with expectations of a 0.3% advance. Annually, the figure rose 3.8%, versus the expectation of a 3.7% increase. Following the CPI report, investors lowered their bets that the Federal Reserve (Fed) would cut interest rates in June to 17%, from 57% before the release of the data, according to the CME's FedWatch tool.

Additionally, Minutes of the last Fed meeting suggested that participants were worried about the persistence of elevated inflation and the recent data did not help the US central bank to gain confidence that inflation moved sustainably towards the 2% target. The officials emphasized the need to keep interest rates higher for longer, which boosts the Greenback and acts as a tailwind for the USD/JPY pair. 

On the other hand, the Japanese Yen (JPY) has faced some selling pressure near a multi-decade low amid the Bank of Japan's (BoJ) cautious approach and uncertainties for future rate hikes. However, the possibility that the Japanese authorities will intervene in the foreign exchange (FX) market might support the JPY and cap the upside of the pair. 

• USD/JPY ascends following a US inflation report indicating reacceleration, challenging levels that might prompt intervention.
• Rising inflation figures push Treasury yields higher and boost the US Dollar.
• Market anticipates future Fed actions with keen interest in upcoming monetary policy minutes.

The USD/JPY rallied to an almost 34-year high after a hotter-than-expected inflation report in the United States (US) sent US Treasury yields soaring. Consequently, the major climbed past the 152.00 figure, seen as a level that could trigger intervention, which so-far hasn’t happened. At the time of writing, the pair trades at 152.70, gains 0.90%.

The pair advances to 152.70, as US CPI data prompts a sharp yield increase, fueling speculation about Fed's rate path–

US economic data revealed by the Bureau of Labor Statistics (BLS) showed that inflation is reaccelerating. The Consumer Price Index (CPI) rose by 0.4% MoM and 3.5% on the yearly figure, exceeding estimates, with the latter also the previous reading. Underlying CPI, which excludes volatile items like food and energy, was above projections but remained unchanged compared to February’s data at 0.4% MoM and 3.8% YoY.

That triggered a reaction in the financial markets, as US Treasury bond yields skyrocketed, with the short end of the curve, namely the 2-year T-note, climbing 20 basis points. Consequently, the Greenback refreshed the year-to-date (YTD) highs of 105.10 yet retreated somewhat, as shown by the US Dollar Index (DXY). The DXY is up 0.81%, at 104.95.

Following the inflation report, the Chicago Board of Trade (CBOT) Fed funds futures estimate just two rate cuts by December 2024, with speculators projecting interest rates to end at around 4.97%.

The USD/JPY rose sharply and hit a multi-year high of 152.73, a level last seen in June 1990, ignoring intervention threats by Japanese authorities that include Finance Minister Shunichi Suzuki, who said that he was watching the market with a high sense of urgency and wouldn’t rule out any steps to address excessive moves.

Ahead in the calendar, market players are eyeing the latest Federal Reserve monetary policy minutes' release.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY is trading at levels that were seen in the 1990s. With the major extending its gains past 152.00, that exposes as the next resistance level, the June 1990 highest peak at 155.78, followed by the 1990’s high at 160.32. On the flip side, the first support would be the psychological 152.00 level, followed by the Tenkan-Sen at 151.77 and the April 5 low of 150.81.

• USD/JPY stays quiet as the market adopts a cautious stance in anticipation of the US CPI release.
• Japan’s PPI YoY and MoM increased by 0.8% and 0.2%, respectively, in March.
• US headline CPI is projected to accelerate in March, while the Core measure is expected to moderate.

USD/JPY remains silent before releasing of the US Consumer Price Index (CPI) data and the FOMC Minutes on Wednesday. The pair hovers around 151.70 during the Asian trading hours. The Japanese Yen (JPY) could face challenges as Bank of Japan (BoJ) Governor Kazuo Ueda stated that they would not alter monetary policy solely to address FX fluctuations.

Governor Ueda also emphasized that Japan's persistent deflation and low inflation levels have posed challenges in influencing public inflation expectations through monetary base expansion. With trend inflation still below 2%, it remains crucial to support the economy's trajectory towards achieving the 2% target by maintaining accommodative monetary conditions.

Data revealed that Japan’s Producer Price Index (PPI) rose by 0.8% year-on-year in March, meeting expectations and accelerating from an upwardly revised 0.7% gain in February. This marks the highest reading since October last year. However, the monthly PPI increased by 0.2%, falling short of the expected 0.3%.

The US Dollar Index (DXY) strives to maintain its position as it anticipates the release of the US Consumer Price Index (CPI) data and the FOMC Minutes later in the North American session.

The US headline Consumer Price Index is projected to accelerate in March, while the core measure is expected to moderate. The US Dollar is in a state of anticipation, awaiting potential policy shifts influenced by incoming data. Strong labor market figures from last week could lead to a more hawkish stance from the Federal Reserve if inflation exceeds expectations.

Analysts at Rabobank share their short-term outlook for the USD/JPY pair following the latest developments.

USD/JPY to trade at lower levels later in the year

"While a break of USD/JPY152.00 may not trigger FX intervention immediately, we would see a strong chance of the MoF acting to prevent a move to 155.00. Strong US inflation data and soft Japanese economic numbers would increase the risk of the MoF being forced into taking action."

"On the assumption that the BoJ will be able to announce a second rate hike later this year and given the expectation that the Fed will be cutting rates in 2024, we expect USD/JPY to be trading at lower levels later in the year. However, we have raised our 1- and 3-month forecasts to 150.00 and 148.00 respectively from 148.00 and 146.00."

• USD/JPY rises up to within a hair’s breadth of 152.000 after comments from BoJ governor Ueda. 
• His views suggest the BoJ is not in a hurry to raise interest rates, reducing the attractiveness of the Yen.
• Analysts are bullish USD/JPY despite the threat of intervention as US-Japan interest rates continue to diverge. 

USD/JPY is edging higher into the 101.90s on Tuesday. The latest move comes after a speech by the Governor of the Bank of Japan (BoJ) Kazuo Ueda in which he suggested that any future interest rate hikes – a key FX-market driver – would be highly dependent on incoming data. 

Prior to his comments, views had been mixed about the likelihood of the BoJ hiking interest rates in the future. Some analysts saw more interest-rate hikes on the horizon given that core inflation in Japan has remained above the BoJ’s target of 2.0% for 23 consecutive months. 

Others have remained more circumspect, pointing to the fact that in Japan where deflation has ravaged for decades, inflation is actually seen as a positive and something to be fostered.

In his speech Ueda seemed to validate those who expect the BoJ to keep interest rates indefinitely low, by introducing doubt about the imminence of future hikes. 

Inflation still below target, says Ueda

According to Ueda, “Trend Inflation”, a somewhat tricky gauge that differs from official headline and core measures, is still running below 2.0% and likely to do so for quite some time. A change in the BoJ’s policy stance, therefore, would be dependent on this measure of inflation rising. 

“If trend inflation accelerates toward our 2% inflation target, it becomes possible to reduce degree of monetary stimulus somewhat,” said Ueda in his speech on Tuesday. 

The two factors the BoJ would be closely monitoring in regards to inflationary pressures would be wage inflation and services inflation, Ueda added. 

USD/JPY trading at historic highs

USD/JPY has been trading at historic highs due to the difference in interest rates in the two countries. In the US they are above 5.0% whereas in Japan they remain at around 0.0%. 

The difference is significant as it favors the USD over the JPY since investors can reap higher interest payments simply by parking their money in the US. 

The effect of the divergence was highlighted by Japanese Current Account data out on Monday, which showed a lower-than-expected level of net inflows into Japan in February. A surplus of over 3 billion JPY had been expected when actually the figure came out at 2.6 billion JPY. 

Doubts over Federal Reserve plans

The effect of interest-rate divergence on USD/JPY has further been exacerbated by changing expectations of monetary policy in the US. 

Whereas the US Federal Reserve (Fed) had expected to make three 0.25% reductions in interest rates in 2024 the start of the year, the persistence of stubbornly high inflation has led many to doubt this will be the case. 

Strong US labor market data on Friday and an unexpected fall in the Unemployment Rate, have further suggested that inflation is likely to remain sticky as more workers earning are likely to also continue spending. 

A key macroeconomic release on the calendar this week will be US Consumer Price Index (CPI) data out on Wednesday. If the data shows a rise above expectations it will further reduce the probability that the Fed will cut interest rates as much as previously expected. 

The persistence of higher interest rates in the US and lower interest rates in Japan are likely to maintain upside pressure on USD/JPY. 

Intervention Fears

The case of USD/JPY is further complicated by the Japanese government and BoJ’s habit of directly intervening in foreign exchange markets to prop up the Yen.

A quick glance at the charts will immediately suggest to the observer that the current level in the 151s is a level that has rejected price multiple times in the past – both in 2022, 2023 and now again in 2024. This is no coincidence. 

The Japanese authorities have repeatedly said they will not tolerate the Yen weakening above this level as it harms businesses. So they tend to intervene at around the 150-152 band to push the exchange rate lower. 

On Tuesday the Japanese Finance Minister Shunichi Suzuki said the authorities would not rule out any measures in dealing with excessive Yen moves, repeating warnings made in his previous statements, according to TradingEconomics.

This has been interpreted by markets as a verbal intervention. It raises the risk of a physical intervention, however, if the USD/JPY tests 152 or higher. 

USD/JPY to 160, say analysts 

Intervention can only achieve so much, however, and strategists at Bank of America Merill Lynch (BofA) recently said in a note that if the fundamentals continue to show such a wide interest-rate divergence, USD/JPY is likely to break higher regardless of the authorities’ attempts to intervene, and potentially make it to 160. 

Such a scenario, however, would be dependent on the Fed scraping its plans for cutting interest rates in 2024, something currently not envisaged.

A combination of the BoJ holding back from raising interest rates in 2024 and the Fed delaying its plans to cut rates could continue exerting upside pressure on the pair. 

A similar conclusion was reached by analysts at Brown Brothers Harriman (BBH) in a recent note in which they said “It’s only a matter of time before USD/JPY rises”. This, they put down to a combination of the BoJ’s very gradual attempts to raise interest rates and the Fed’s likely delay in making interest rate cuts.

• The US Dollar remains bid, crawling towards the key 152.00 level.
• The upbeat US Nonfarm Payrolls report and Fed officials' recent hawkish comments underpin the USD.
• The interest rate differential between the BoJ and the rest of the world’s major central banks limits Yen's recovery attempts.

The US Dollar has nudged higher against the Japanese Yen on Monday, returning to levels a few pips shy of the 152.00 level. This level triggered a BoJ intervention in 2022 and is considered a line in the sand for the Japanese financial authorities.

The strong US macroeconomic data, namely Friday’s Nonfarm Payrolls report and the recent hawkish tilt of the Fed rhetoric is increasing negative pressure on the Yen. 

Markets are paring back hopes of a Fed rate cut in June, while the BoJ is expected to keep its benchmark rate near zero for some time. This leaves the JPY as the carry trade funding currency of choice, with investors borrowing Yen to look for higher yields elsewhere.

Japanese officials have reiterated their will to step in the market to stem excessive Yen volatility. That is keeping Dollar buyers from placing strong USD longs, although JPY recovery attempts remain limited above 150.85 

USD/JPY is expected to rally above its current range in the 151.000s, according to Strategists at BBH. 

A combination of very gradual BoJ tightening and a more muted than currently priced-in Federal Reserve (Fed) easing cycle are the fundamental catalysts. 

USD/JPY falls due to Ueda – will rise eventually 

“USD/JPY fell by over 0.50% to an intra-day low around 150.80 following hawkish comments from BOJ Governor Ueda.”

“Verbal defense on the Yen continues as Japanese Finance Minister Suzuki and Prime Minister Kishida both warned against excessive yen moves.”

“It’s only a matter of time before USD/JPY breaks higher because we anticipate a gradual BOJ tightening process and a more muted than currently priced-in Fed easing cycle.”

• USD/JPY could meet the immediate barrier around March’s high of 151.97 and the psychological level of 152.00.
• The lagging indicators suggest a confirmation of the bullish trend for the pair.
• The pair could test the support region around the major level of 151.50 and the nine-day EMA at 151.39.

USD/JPY exhibits sideways trading on Thursday, hovering around 151.70 during the European trading hours. The pair may encounter immediate resistance around the recent high of 151.95 marked on Wednesday, which aligns with March’s high of 151.97 and the psychological level of 152.00.

A breakthrough above this level could support further upward movement, potentially allowing the USD/JPY pair to explore the region around the major level of 152.50.

The technical analysis for the USD/JPY pair indicates a bullish momentum, with the 14-day Relative Strength Index (RSI) positioned above the 50 level.

Additionally, the Moving Average Convergence Divergence (MACD) indicator confirms the bullish trend, with the MACD line above the centerline and showing divergence above the signal line.

On the downside, the USD/JPY could find immediate support at a significant level of 151.50, followed by the nine-day Exponential Moving Average (EMA) at 151.39.

A breach below the latter level might exert downward pressure on the USD/JPY pair, potentially leading to a test of the psychological mark of 151.00 before reaching the 23.6% Fibonacci retracement level of 150.67.

USD/JPY: Daily Chart

• USD/JPY hovers near historic highs around 152.00 ahead of Fed Powell’s speech.
• The US ADP Employment report for March has indicated that private labor demand remains strong.
• Investors remain uncertain over Japan’s wage growth spiral.

The USD/JPY pair rebounds to historic highs of 152.00 in Wednesday’s early American session. The asset is expected to extend its upside by easing expectations that the Federal Reserve (Fed) will begin reducing interest rates from the June meeting.

Fed policymakers don’t see any urgency for rate cuts as labor market conditions are tight and the economic outlook is strong. On Tuesday, Cleveland Fed Bank President Loretta Mester said that the central bank sees more risk in cutting interest rates too early. Fed Mester added: “With labor markets and economic growth both being very solid, we do not need to take that risk”. At the same time, she sees three rate cuts as “reasonable” this year.

Meanwhile, the United States ADP reported upbeat employment data for March. The agency reported that private employers hired 184K new workers against expectations of 148K and the prior reading of 155K (revised up from 140K).

Going forward, investors will focus on Fed Chairman Jerome Powell's speech, which is expected at 16:10 GMT. Powell is expected to provide cues about when the central bank will pivot to rate cuts.

Meanwhile, the Japanese Yen is broadly weak as investors lack confidence that the Bank of Japan (BoJ) will tighten its policy sooner due to uncertainty over the wage growth spiral. Investors seem to have digested fears of Japan’s intervention in the FX domain to support the Japanese Yen.

• USD/JPY trades subdued with potential intervention by Japanese authorities.
• Technical analysis shows 152.00 as a crucial hurdle; overcoming this could target the 153.00 level for buyers.
• A break below the Tenkan-Sen could lead to losses below 150.00, with the Ichimoku Cloud providing additional key points for traders.

The USD/JPY remained capped at around 151.50 on Tuesday amid intervention threats from Japanese authorities. The close correlation between the US 10-year Treasury notes yield, and the major hasn’t influenced the pair’s price action, which has remained below the 152.00 mark.

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains capped by the 152.00 figure, though technical support lies at the Tenkan-Sen at 151.12. If buyers reclaim 152.00, that will pave the way for resting the 153.00 figure. On the other hand, if sellers push the exchange rate below the Tenkan Sen, that will pave the way to 151.00.

Once surpassed, the next support emerges at the Senkou Span A at 10.17, followed by the Kijun-Sen at 149.23. Further weakness in the pair could send it toward the Senkou Span B at 148.93, well inside the Ichimoku Cloud (Kumo).

USD/JPY Price Action – Daily Chart