The Japanese Yen (JPY) remained under pressure during the Asian session on Wednesday, as the US Dollar (USD) gained momentum, pushing the USD/JPY pair further into the mid-150.00s. Economic data released today showed Japan’s Service Producer Price Index (PPI) eased to a 3.0% year-on-year growth in February, down from January’s 3.1% increase. The generally positive sentiment in global equity markets also weighed on the safe-haven Yen.
Despite the Yen’s ongoing weakness, a significant depreciation seems unlikely, as market expectations grow that the Bank of Japan (BoJ) will continue its interest rate hikes. In contrast, the Federal Reserve (Fed) has kept its forecast for two 25-basis-point rate cuts in 2025, which could cap the USD’s strength. As the interest rate differential between Japan and the US narrows, it may support the Yen and limit any further upside for the USD/JPY pair.
JPY Faces Pressure from Risk-On Sentiment and Renewed USD Buying
The BoJ’s latest report revealed that Japan’s Services PPI rose 3.0% year-on-year in February, slightly below the 3.1% increase seen in January. On a monthly basis, the index remained unchanged after a 0.5% drop in January. BoJ Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if economic conditions align with its forecasts. Additionally, ongoing wage hikes in Japan support expectations for further tightening by the BoJ.
Meanwhile, the Fed’s signal of two potential rate cuts later this year, coupled with an upward revision to its inflation projection, has been offset by concerns about the US economy. Pessimism surrounding US growth has been rising, particularly after US President Donald Trump’s announcement of retaliatory tariffs, which will take effect on April 2. This has weighed on US Consumer Confidence, which fell for the fourth consecutive month in March, reaching a 12-year low.
These developments have prompted a pullback in the USD from a nearly three-week high reached on Tuesday, impacting the USD/JPY pair. Despite hawkish comments from Fed Governor Adriana Kugler, who noted that progress toward the 2% inflation target has slowed, the USD remains under pressure. Market attention now turns to upcoming economic data, including the US Durable Goods Orders report on Wednesday and the crucial US Personal Consumption Expenditure (PCE) Price Index on Friday.
Technical Outlook for USD/JPY: Bulls Eye Key Level at 151.00
From a technical perspective, USD/JPY bulls gained traction after breaking above the 200-period Simple Moving Average (SMA) on the 4-hour chart. Oscillators on the daily chart are showing positive momentum, suggesting the path of least resistance remains to the upside. However, the failure to hold above the 151.00 level requires caution. Traders may look for sustained strength above this threshold before anticipating further upward movement, which could push the pair toward the 151.30 area and the key 152.00 level.
On the downside, the 149.55 support level, marked by the overnight swing low, may protect the immediate downside. A drop below this level could see the USD/JPY pair testing 149.00, with further potential to slide toward 148.75-148.70 and ultimately the 148.00 round figure. A break of this support could pave the way for a deeper correction toward the 147.35-147.30 zone and potentially below 147.00 to the multi-month low of 146.55-146.50 reached earlier this month.
Related Topics:
