USD/JPY Price Forecast: Sticks to gains above 155.00, over one-week top ahead of US data

USD/JPY gains some follow-through traction as Japan’s softer CPI undermines the JPY.
The USD sits near a one-month top amid hawkish Fed repricing and supports spot prices.
The technical setup backs the case for further gains as bulls await key US macro data.

Haresh Menghani FXStreet

The USD/JPY pair gains positive traction for the third straight day and climbs to over a one-week top, around the 155.35-155.40 region on Friday. Data released early today showed that Japan’s key inflation gauge eased to the slowest pace in two years, tempering expectations for an immediate policy tightening by the Bank of Japan (BoJ). Apart from this, concerns about Japan's fiscal health undermine the Japanese Yen (JPY) and act as a tailwind for the currency pair.

The US Dollar (USD), on the other hand, stands firm near its highest level since January 23 amid receding bets for aggressive easing by the US Federal Reserve (Fed). This turns out to be another factor that provides an additional boost to the USD/JPY pair. Meanwhile, Japan's Prime Minister Sanae Takaichi said that she will steadily lower the debt-to-GDP ratio and restore fiscal sustainability. This helps ease market worries, limiting losses for the JPY and capping the pair.

Furthermore, investors seem convinced that the BoJ will stick to its policy tightening path. This marks a significant divergence in comparison to the growing acceptance that the Fed will lower borrowing costs at least two times this year, and contributes to keeping a lid on the USD/JPY pair. Traders also seem reluctant and now look to the key US macro releases – the Advance Q4 GDP report and the Personal Consumption Expenditure (PCE) Price Index – for a fresh impetus.

From a technical perspective, the recent repeated rebounds from the 200-day Exponential Moving Average (EMA) and a move beyond the 38.2% Fibonacci retracement level of the sharp corrective slide from the January swing high favor the USD/JPY bulls. Meanwhile, the Moving Average Convergence Divergence (MACD) edges into positive territory near the zero line. The MACD line stands slightly above the Signal line, and the histogram is modestly positive, suggesting improving momentum.

The Relative Strength Index (RSI) at 50 (neutral) reflects balanced pressure, suggesting that the move up might confront a hurdle near the 50% retracement at 155.79 ahead of the 61.8% Fibo. retracement at 156.64. Follow-through topside traction would strengthen if the USD/JPY pair clears overhead retracements, opening a path toward the 78.6% Fibo. retracement at 157.86. If buyers fail to overcome resistance, spot prices could revert toward the 200-day EMA at 152.63 and the 152.15 swing low.

That said, the rising 200-day EMA at 152.63 keeps the broader bias supported. Pullbacks would find initial dynamic support near that average. The MACD’s modestly positive stance and a slightly widening histogram reinforce an improving tone, though both remain near the zero mark. RSI around 50 keeps a consolidative bias, and a push above the mid-50s would add conviction to the recovery.

(The technical analysis of this story was written with the help of an AI tool.)

USD/JPY daily chart

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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