The Japanese Yen (JPY) pares intraday gains against the US Dollar (USD) on Friday following Japan’s decision to trim its FY25/26 budget to ¥115.2 trillion. However, the JPY remains supported by expectations of further Bank of Japan (BoJ) rate hikes, limiting any significant depreciation.
Market sentiment points to the BoJ tightening monetary policy as inflation gradually approaches the central bank’s 2% target, according to Deputy Governor Shinichi Uchida. This outlook counterbalances softer Tokyo Consumer Price Index (CPI) data, which showed headline inflation easing to 2.9% in February from 3.4% previously. Meanwhile, core CPI dropped to 2.2%, while industrial production marked a third consecutive monthly decline, falling 1.1% in January.
Despite mixed domestic data, the JPY finds strength amid risk-off sentiment and the BoJ’s hawkish stance. However, the USD remains resilient near weekly highs, bolstered by steady US GDP growth at 2.3% in Q4 2024 and rising inflation concerns. Comments from Federal Reserve officials, including Kansas City Fed President Jeff Schmid and Philadelphia Fed President Patrick Harker, signaled a cautious approach to rate cuts as inflationary pressures persist.
From a technical perspective, USD/JPY trades within a narrow range, consolidating below 150.00. The immediate downside is protected by the 149.00 level, with further support at 148.55. A break below this zone could accelerate losses toward 148.00 and 147.00.
On the upside, resistance emerges at 150.00 and 150.30, with a sustained break potentially sparking a rally toward 151.00 and 152.40—the 200-day Simple Moving Average (SMA) and a key pivot point.
Investors now await the US Personal Consumption Expenditure (PCE) Price Index, which could provide further cues on the Federal Reserve’s policy trajectory and influence the USD/JPY pair’s next move.
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