The Japanese Yen (JPY) gained ground against the US Dollar (USD) during the Asian trading session on Wednesday, reversing part of its recent losses. Renewed expectations that the Bank of Japan (BoJ) will continue its tightening cycle amid persistent inflationary pressures have provided support for the Yen. Additionally, rising Japanese bond yields have contributed to a narrowing of the rate differential between Japan and other major economies, further bolstering demand for the currency.
Hawkish BoJ Expectations Drive Yen Higher
Recent comments from BoJ Governor Kazuo Ueda and Deputy Governor Shinichi Uchida have reinforced the possibility of another interest rate hike if economic conditions align with the central bank‘s forecasts. On Wednesday, BoJ Board Member Hajime Takata also emphasized the need for a gradual shift in monetary policy to counter potential inflation risks.
Japan’s Q4 GDP data, released earlier this week, exceeded expectations, reinforcing bets that the BoJ could tighten policy further. The International Monetary Fund (IMF) estimates Japan’s neutral interest rate at 1%–2% and projects that the BoJ will raise rates to around 1.5% by 2027.
Meanwhile, the yield on Japan’s 10-year government bond climbed to its highest level since 2010, strengthening the Yen further.
USD Pressured Amid Fed Rate Cut Speculation, Global Risk Sentiment in Focus
While the Federal Reserve (Fed) remains cautious about cutting rates too soon, expectations for monetary easing later in 2024 have kept the USD under pressure. Investors are awaiting the FOMC meeting minutes, set for release later in the North American session, for further clarity on the Fed’s policy trajectory.
Risk sentiment has been influenced by ongoing geopolitical developments. A meeting between US and Russian officials in Saudi Arabia raised hopes for potential progress in ending the war in Ukraine. Additionally, a delay in the implementation of Trump’s proposed reciprocal tariffs has eased immediate market concerns, reducing safe-haven demand for the Yen.
Technical Outlook: USD/JPY Faces Resistance, 151.00 Mark Crucial for Bears
From a technical perspective, USD/JPY is facing key resistance at the 200-day Simple Moving Average (SMA) near 152.65, followed by the 153.00 psychological level. A sustained break above the 153.30–153.35 zone (100-day SMA) could open the door for further gains toward 154.00, with an eventual target near 155.00.
On the downside, initial support lies at 151.75, with a deeper pullback likely if the pair breaks below the 151.25 level. A decisive move under the 151.00 mark would confirm a bearish shift, potentially accelerating the decline toward 150.60 and the 150.00 psychological support. Further losses could see the pair testing 149.60–149.55, with the next key support at 148.65 (December 2024 low).
As investors navigate BoJ tightening expectations, Fed policy signals, and geopolitical risks, USD/JPY remains vulnerable to further volatility in the near term.
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