USD/JPY Price Forecast: Bulls await move beyond 144.35-144.40 hurdle ahead of US data

The USD/JPY pair attracts some buyers for the second straight day, though it lacks follow-through buying and remains below mid-144.00s through the first half of the European session on Wednesday. The US Dollar (USD) continues with its struggle to attract any meaningful buyers amid dovish Federal Reserve (Fed) expectations and US fiscal concerns. Furthermore, bets that the Bank of Japan (BoJ) will hike interest rates further, amid signs of broadening inflation in Japan, continue to underpin the Japanese Yen (JPY), and contribute to capping the currency pair.

Investors seem convinced and have been pricing in the possibility that the central bank will deliver at least two 25 basis points (bps) rate cuts by the end of this year. Adding to this concerns that the US budget deficit could worsen at a faster pace than expected on the back of US President Donald Trump’s flagship tax and spending bill overshadow the upbeat US labor market report. In fact, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of April stood at 7.39 million. This reading was above the market expectation of 7.1 million and the 7.2 million openings recorded in March.  The data pointed to a still resilient US labor market and bolsters optimism regarding the health of the economy. This, however, provides only a short-lived boost to the Greenback.

The JPY, on the other hand, continues to draw support from the growing acceptance that the Bank of Japan (BoJ) will continue raising interest rates in 2025. The bets were reaffirmed by a private sector survey on Wednesday, which showed that growth in Japan’s service-sector activity slowed less than initially estimated in May. The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) was revised from a 50.8 flash reading to 51.0. This was below the previous month's final print of 52.4, though it signaled a second consecutive month of expansion in services activity and kept hopes alive for a further BoJ policy normalization. Apart from this, persistent geopolitical risks stemming from the protracted Russia-Ukraine war and conflicts in the Middle East, along with trade-related uncertainties, contribute to the safe-haven JPY's relative outperformance against its American counterpart.

The downside for the USD/JPY pair, however, remains cushioned as traders opt to wait for potential talks between Trump and Chinese President Xi Jinping on Friday amid a trade stalemate. It, however, remains unclear if such a call had been arranged. Meanwhile, Trump wrote on Truth Social that it was extremely hard to make a deal with his Chinese counterpart Xi Jinping. This keeps the risk premium associated with a trade war between the world's two largest economies, which, along with the divergent Fed-BoJ policy expectations, favors the JPY bulls. Traders now look forward to the release of the US ADP report on private-sector employment and the US ISM Services PMI. Apart from this, speeches from influential FOMC members will drive the USD demand and provide some impetus to the USD/JPY pair in the run-up to the crucial US Nonfarm Payrolls (NFP) report on Friday.

USD/JPY 4-hour chart

Technical Outlook

Oscillators on the 4-hour chart have just started gaining positive traction and suggest that the path of least resistance for the USD/JPY pair is to the upside. That said, it will still be prudent to wait for a sustained move and acceptance above the 144.35-144.40 horizontal barrier, which now coincides with the 100-period Simple Moving Average (SMA) on the 4-hour chart, before positioning for further gains. Spot prices might then surpass the 144.75-144.80 intermediate hurdle and conquer the 145.00 psychological mark. The momentum could extend further and lift spot prices to the 146.00 round figure en route to last week's swing high, around the 146.25-146.30 region.

On the flip side, the 143.60-143.50 area now seems to act as immediate support, below which the USD/JPY pair could slide to the 143.00 round figure. A convincing break below the latter would negate any near-term positive bias and drag spot prices to the 142.40-142.30 region, or the weekly trough set the previous day, en route to the May monthly swing low, around the 142.10 area touched last Tuesday. Some follow-through selling, leading to a further weakness below the 142.00 mark, will be seen as a fresh trigger for bearish traders and make spot prices vulnerable to resume the recent downward trajectory from the May swing high.