USD/JPY Price Forecast: Bulls turn cautious near two-week top; FOMC Minutes awaited

The USD/JPY pair surrenders its intraday gains to a two-and-a-half-week high touched earlier this Wednesday and trades just above the mid-146.00s during the first half of the European session. Traders scaled back their bets for an immediate interest rate hike by the Bank of Japan (BoJ) amid concerns over the potential economic fallout from US President Donald Trump's trade tariffs. This, along with a broadly firmer US Dollar (USD), turns out to be a key factor that should continue to act as a tailwind for the currency pair.

Trump unnerved investors earlier this week and announced that his administration will impose a 25% tariff on goods imported from Japan starting from a new deadline of August 1. Furthermore, Trump warned that any retaliatory levies would draw a like-for-like response and vowed to further escalate his trade wars, threatening tariffs of up to 200% on foreign drugs and 50% on copper. Meanwhile, Japanese Prime Minister Shigeru Ishiba said in a cabinet meeting on Tuesday that bilateral talks would continue towards seeking a mutually beneficial trade deal.

Nevertheless, the developments add to woes for Japan’s economy, which shrank in the first quarter on soft consumption. Adding to this, government data released on Monday showed that the growth in Japan's nominal wages decelerated for the third straight month in May 2025 and inflation-adjusted real wages posted the steepest decline in 20 months. Moreover, rising trade tensions could complicate the BoJ’s monetary policy normalization schedule, which continues to undermine the Japanese Yen (JPY) and supports the USD/JPY pair amid some follow-through USD buying.

Investors now seem convinced that US tariffs will eventually feed through into higher prices and allow the Federal Reserve (Fed) to stick to its wait-and-see approach. Moreover, the upbeat US jobs report for June eased concerns about a slowing US economy and evaporated odds of a rate cut at the Fed's upcoming policy meeting in July. This remains supportive of elevated US Treasury bond yields and assists the USD to stand firm near a two-week high. Furthermore, domestic political uncertainty undermines the JPY and contributes to the USD/JPY pair's positive move.

Recent media polls raised doubts about whether the ruling coalition of the Liberal Democratic Party (LDP) and its junior partner Komeito will be able to secure enough seats to maintain their majority at the July 20 House of Councillors election. This could complicate trade negotiations and also heighten both fiscal and political risks in Japan, which, in turn, favors the JPY bears. Traders, however, might opt to wait for the release of FOMC meeting Minutes to get fresh insight about the Fed's policy path before placing fresh bullish bets around the USD/JPY pair.

USD/JPY daily chart

Technical Outlook

The USD/JPY pair's overnight sustained breakout and close above the 100-day Simple Moving Average (SMA) for the first time since February could be seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and are still far from being in the overbought zone. This, in turn, validates the near-term positive outlook and backs the case for a further appreciating move towards the 147.60-147.65 intermediate hurdle en route to the 148.00 round figure, or the June monthly swing high.

On the flip side, weakness below the Asian session low, around the 146.50 area, could be seen as a buying opportunity and is more likely to remain limited near the 100-day SMA resistance breakpoint, currently pegged just below the 146.00 mark. The latter should now act as a strong near-term base for the USD/JPY pair, which if broken decisively might shift the near-term bias in favor of bearish traders and pave the way for some meaningful downside. The subsequent fall could drag spot prices to the 145.65-145.60 horizontal zone en route to the 145.00 psychological mark. The next relevant support is seen near the 144.35-144.30 area before the pair eventually drops to the 144.00 round figure.