Yen weakens amid Fed rate expectations and Bank of Japan signals

The USD/JPY pair climbed to 147.67 on Monday as the Japanese yen underwent a correction following Friday’s volatile trading session, with investors closely monitoring macroeconomic developments.

Market focus remains on shifting US Federal Reserve policy expectations after the release of softer labour market data. Although Friday’s report bolstered predictions of a rate cut, Fed officials have maintained a cautious tone, citing persistent inflation risks. Proposed large-scale tariffs from US President Donald Trump have further amplified these concerns.

Against this backdrop, the US dollar has partially regained strength, exerting downward pressure on the yen.

Investors are now awaiting the release of the Bank of Japan (BoJ) meeting minutes, hoping for clues on the timing of a potential rate hike. Last week, the Japanese central bank left interest rates unchanged but raised its inflation forecast and highlighted growing uncertainty due to global trade risks.

Overall, the outlook for the JPY remains subdued. The BoJ has ample room to delay rate hikes, justifying its stance with ongoing caution.

Technical analysis: USD/JPY

H4 Chart:

On the H4 chart, USD/JPY completed an upward wave to 150.90 before entering a correction phase. A further decline towards 146.52 is anticipated today. Once this level is reached, the pair may initiate a new growth wave, potentially targeting 151.00, with a longer-term prospect of extending the trend to 153.10. This scenario is supported by the MACD indicator, where the signal line remains above zero but is trending sharply downward.

H1 Chart:

On the H1 chart, USD/JPY is forming a corrective structure towards 146.52. A temporary rebound to 148.70 (testing from below) is expected today, followed by a possible resumption of the correction to 146.52. Once this correction concludes, a fresh upward wave towards 151.00 could materialise. The Stochastic oscillator validates this outlook, with its signal line positioned above 50 and pointing upwards.

Conclusion

The yen remains under pressure amid shifting Fed expectations and cautious BoJ signals. Technically, USD/JPY is poised for further correction before potentially resuming its uptrend.