The Japanese Yen (JPY) reversed its intraday declines against a faltering US Dollar (USD) and is trading close to a multi-month high, fueled by increasing bets for further interest rate increases by the Bank of Japan (BoJ). Rising JGB yields and the decreasing rate differential between the US and Japan remain supportive of the JPY. Nevertheless, fears of US tariffs on Japan, rising US Treasury yields, and positive risk sentiment in the market could cap further appreciation of the safe-haven currency. While the technical indicators hint at a bearish consolidation in the USD/JPY currency pair, traders are keeping their eyes on the US Nonfarm Payrolls (NFP) report due to be released, which may provide more guidance. A fall below the 148.00 mark is still feasible, while the 150.00 level can act as resistance to any expected bounce.

KEY LOOKOUTS

• The market expects further interest rate hikes by the Bank of Japan to support the JPY and tighten the US-Japan yield differential.

• Future Nonfarm Payrolls (NFP) and other jobs numbers will impact USD sentiment and could guide the next significant move for USD/JPY.

• Fears of additional tariffs by the US against Japanese imports could bring uncertainty and affect risk sentiment, which can influence JPY’s safe-haven demand.

• USD/JPY is marked at important support around 148.00, with a breakdown lower to intensify downside potential, while resistance around 150.00 might limit rebounds.

Japanese Yen (JPY) is still in the spotlight as investors watch for major economic and geopolitical drivers underpinning its direction versus the US Dollar (USD). Hopes for additional rate increases by the Bank of Japan (BoJ) still underpin the JPY, reducing the US-Japan yield gap and making the currency stronger. In the meantime, the highly anticipated US Nonfarm Payrolls (NFP) report is set to be a key driver, dictating USD sentiment and determining the next direction for the USD/JPY currency pair. Furthermore, fear of possible US tariffs on Japanese imports introduces a degree of uncertainty, which may affect risk appetite and propel demand for safe-haven currencies such as the JPY. Technically, the 148.00 support is still key, with a breach through it possibly fueling further losses, while the 150.00 psychological resistance could limit any near-term bounces.

The Japanese Yen (JPY) continues to appreciate against the US Dollar (USD) on the back of BoJ rate hike expectations and a declining US-Japan yield gap. But future US Nonfarm Payrolls (NFP) figures and fears of possible US tariffs on Japan could sway market sentiment. The major technical levels of 148.00 support and 150.00 resistance will decide the next big move in USD/JPY.

• Increasing speculation of additional Bank of Japan (BoJ) rate increases underpins the JPY and reduces the US-Japan interest rate spread.

• The JPY is at a multi-month high against the USD, erasing intraday losses as part of the broader USD weakness.

• The coming US Nonfarm Payrolls (NFP) release and other jobs data will be pivotal in guiding the direction of the USD/JPY pair.

• Concerns that the US is going to impose additional tariffs on Japan introduce uncertainty and could influence market sentiment.

• Higher Japanese government bond (JGB) yields and declining US Treasury yields make JPY stronger against the USD.

• As much as JPY gains on safe-haven demand, rising US bond yields and positive risk tone could keep further gains in check.

• USD/JPY has significant support at 148.00, while resistance around 150.00 can cap potential rallies, setting the stage for the next big move.

The Japanese Yen (JPY) continues to benefit from increasing hopes that the Bank of Japan (BoJ) will continue to hike interest rates. The change in monetary policy is a testiment to Japan’s changing economic terrain, where economic stability and inflationary pressures have become central concerns. The increase in Japanese government bond (JGB) yields also indicates a shift away from the nation’s historically ultra-loose monetary policy. Consequently, investors are becoming more confident in the JPY as a solid alternative during times of global economic uncertainty. Moreover, Japan’s economic resilience and government policies to maintain growth continue to support market sentiment towards the Yen.

USD/JPY Daily Price Chart

Chart Source: TradingView

Meanwhile, geopolitical and trade-related issues continue to be significant determinants of market conditions. The recent talks about the possibility of US tariffs on imports from Japan have generated wary mood, given that trade policy can have a broader impact on economic relations between the two countries. Market participants are keeping a close eye on events, as a change in trade relationships may affect Japan’s export-oriented economy. In the meantime, the global financial market is keenly watching major economic indicators, especially in the US, where employment figures and fiscal policies might have an impact on wider currency movements. During these events, the JPY continues to be a key factor in the forex market, a reflection of Japan’s economic prowess and policy changes.

TECHNICAL ANALYSIS

USD/JPY pair has been consolidating in a familiar range after a sharp drop from its yearly high around 159.00. The present price action implies a bearish consolidation phase, with momentum indicators on the daily chart remaining in negative ground but not yet triggering oversold readings. This suggests that the downtrend is likely to persist, with major support at the 148.00 level, which, if broken, could speed further losses toward the 147.35 zone. On the positive side, the 149.50-150.00 area represents instant resistance, and any movement above this can possibly lead to a short-covering rally. But overall market sentiment and technical factors will then dominate the move in the next big move in the pair.

FORECAST

If sentiment is changed in the direction of the US Dollar (USD), then the USD/JPY can make a northward movement if there are any positive surprises on US economic numbers, like Nonfarm Payrolls (NFP), in the near future. A good jobs report would underpin the anticipation that the Federal Reserve will remain prudent in the rate-cut stance, favoring the USD. Moreover, if the world risk appetite gets better and equity markets continue to hold strong, the need for safe-haven currencies such as Japanese Yen (JPY) might reduce, paving the way for USD/JPY to recover. In this case, the pair can challenge crucial resistance zones of around 149.50-150.00, and a breakout can take it to 150.55-151.00 with a strong hold.

Conversely, further USD weakness, combined with ongoing BoJ rate hike speculations, will maintain the JPY well-backed and drive USD/JPY downwards. Were the US economy to weaken with lower job growth or falling consumer confidence, bets for earlier Fed rate cuts can rise, with further pressure being exerted on the USD. Moreover, if Japanese government bond (JGB) yields keep increasing and US Treasury yields fall, the shrinking rate differential would again support the JPY. Under such circumstances, the pair might dip below the key 148.00 support level, triggering further losses down to 147.35 and even the 147.00 psychological level.