The Japanese Yen (JPY) extended its upward trajectory against the US Dollar (USD) for a third consecutive session on Thursday, buoyed by growing expectations of further monetary tightening by the Bank of Japan (BoJ) and a cautious market tone that favored safe-haven assets.
The latest wholesale inflation data from Japan, released on Wednesday, showed that companies are continuing to pass on higher costs to consumers. This persistent inflationary pressure has fueled speculation that the BoJ will maintain its path of policy normalization, lending support to the Yen. Reinforcing this sentiment, BoJ Deputy Governor Shinichi Uchida reiterated that rate hikes would continue if economic and price conditions align with the central bank‘s forecasts.
Global risk appetite showed signs of weakening, as evidenced by a subdued performance in equity markets. This risk-off sentiment further enhanced the appeal of the Yen, traditionally viewed as a haven in times of uncertainty. Concurrently, the USD slipped modestly, pushing the USD/JPY pair back toward the 146.00 level during the Asian session.
Despite this, optimism stemming from the 90-day US-China tariff truce and a moderation in expectations for aggressive Federal Reserve (Fed) rate cuts may cap the Yen’s upside. A less dovish Fed outlook, paired with resilience in the US economy, could lend some support to the Dollar and temper further declines in the USD/JPY exchange rate.
Investor focus has now shifted to key US economic data due later Thursday, including the Producer Price Index and comments from Fed Chair Jerome Powell. This follows Tuesday’s weaker-than-expected Consumer Price Index, which had reinforced market expectations for future Fed rate cuts but failed to provide lasting support for the Dollar.
However, Fed officials have expressed a more measured stance. Chicago Fed President Austan Goolsbee emphasized the lagged effects of inflation data, suggesting the central bank should remain patient and sift through short-term volatility. Similarly, Fed Vice Chair Philip Jefferson acknowledged progress toward the 2% inflation goal, though warned of uncertainty due to trade dynamics. San Francisco Fed President Mary Daly echoed the view, stating that current monetary policy remains appropriately restrictive, with flexibility to respond as the economy evolves.
Technical Outlook: USD/JPY Risks Further Decline
From a technical perspective, USD/JPY faces continued downward pressure. The pair failed to sustain momentum beyond the 23.6% Fibonacci retracement level of its April recovery. Momentum indicators on short-term charts point to further downside potential below the 146.00 threshold, with immediate support near 145.60—Wednesday’s weekly low. A deeper decline could test the 145.30–145.35 region (38.2% Fibo.), with a drop below 145.00 possibly opening the door to 144.65–144.70, aligning with the 200-period Simple Moving Average on the 4-hour chart. A decisive breach of this level would likely mark the end of the pair’s recent rebound.
On the upside, immediate resistance lies at 146.60, with stronger barriers at 147.00 and 147.70. A breakout above the 148.00 zone could invite further buying interest, potentially targeting 148.65 and the 149.00 level—last seen over a month ago.
In the short term, the Yen’s fate hinges on evolving BoJ policy expectations, the global risk environment, and market interpretation of upcoming US inflation data and Fed commentary.
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