- For two consecutive days, the USD/JPY currency pair has been attempting to recover from its recent strong losses, which pushed it towards the support level of 146.55, the lowest for the pair in five months.
- However, the upward rebound gains did not exceed the resistance level of 149.19, and it returned to stabilize below around the support of 148.20 at the time of writing the analysis, following weaker-than-expected US inflation figures, which may support further US interest rate cuts.
USD/JPY is in a stronger downtrend
According to Forex market trading, the bears' control remained stronger on the USD/JPY currency pair's performance, after the weaker-than-expected US inflation data eased stagflation fears, boosting the US dollar. However, the currency remains close to its five-month highs, as traders expect further interest rate hikes in Japan, where the inflation rate is expected to remain high. Japanese companies have agreed to significant wage increases for the third consecutive year, aiming to help workers cope with inflation and address labour shortages. The rise in wages is expected to boost consumer spending, leading to higher inflation, and possibly give the Bank of Japan more room to raise interest rates again.
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We still recommend buying the dollar against the Japanese yen at every downward trend, but without risk and spreading your trades across multiple levels.
Japanese Government Bond Yields Rise
According to recent trading, the 10-year Japanese government bond yield rose above 1.5% yesterday, approaching its highest level since the 2008 global financial crisis, after Japanese companies agreed to substantial wage increases for the third consecutive year, aiming to help workers combat inflation and address labour shortages. The annual spring labour negotiations have resulted in significant wage increases for three consecutive years—unprecedented since Japan entered a prolonged economic contraction in the 1990s.
Rising wages are expected to boost consumer spending, fuelling inflation and giving the Bank of Japan more room to raise interest rates again. Meanwhile, Bank of Japan Governor Kazuo Ueda indicated there are no immediate plans to intervene in the bond market, emphasizing that yields reflect market expectations regarding economic conditions, inflation, and shifts in global interest rates. While the Bank of Japan is widely expected to keep interest rates steady at its March meeting, policymakers remain on track for further tightening later this year.
USD/JPY Technical analysis and Expectations Today:
According to the daily chart above, the overall trend for the USD/JPY pair remains bearish, and to break the trend, bulls should launch the pair towards the resistance levels of 150.55 and 151.70, respectively. As previously mentioned, a move below the 150.00 level will remain supportive of bears moving the currency pair down. The buy strategy for the pair will remain valid, taking into account the influencing factors, such as the future of the Bank of Japan's policies and investor risk appetite due to the expansion of the US trade war.
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