**Japanese Yen and Aussie Dollar Forecasts: Will USD/JPY Break 145 Amid Fed Rate Cuts?**
*Originally written by James Hyerczyk, adapted and expanded for clarity and detail.*
The currency markets are entering a transformative period as global central banks begin shifting their monetary policy stances. With the U.S. Federal Reserve potentially nearing an interest rate pivot and the Bank of Japan (BoJ) maintaining ultra-loose monetary policy, key currency pairs like the USD/JPY and AUD/USD are likely to experience notable fluctuations in the coming months.
This article dives deep into the current technical and fundamental landscape governing the Japanese Yen and Australian Dollar, evaluating whether the USD/JPY can break below the key 145 threshold and where the AUD/USD may be headed if the Federal Reserve initiates interest rate cuts.
## Japanese Yen Outlook: Direction Hinges on Fed and BoJ Divergence
The Japanese Yen has remained weak against the U.S. Dollar for the past few years, largely due to the stark policy divergence between the Bank of Japan and the Federal Reserve. While the Fed embarked on the most aggressive rate hike cycle in decades, the BoJ has largely stuck to its ultra-easy monetary stance. This divergence has favored the USD/JPY pair, which remains elevated.
However, with Fed rate cuts on the horizon and Japanese inflation indicators moving upward, the tide might soon start shifting.
### Key Factors Influencing USD/JPY:
– **Federal Reserve monetary policy outlook:**
Fed Chair Jerome Powell and other officials have signaled a pause in rate hikes and even hinted at rate cuts by the end of 2024, if inflation continues its downward trajectory. This shift could ease the interest rate differential that had been supporting the USD/JPY pair.
– **Bank of Japan policy trajectory:**
The BoJ has recently removed its yield curve control (YCC) policy and is starting to show signs of cautiously exiting its decade-long ultra-easy stance. Rates remain in negative territory, but pressure is growing for slowly shifting toward normalization.
– **Inflation and wage growth in Japan:**
Recent CPI data have indicated persistent inflation above the BoJ’s 2 percent target. Coupled with stronger-than-expected spring wage negotiations, this supports a potential shift in BoJ policy.
– **Currency intervention risks:**
Japanese officials have made it clear that if the Yen weakens too quickly, particularly beyond the 150 psychological threshold, they would intervene in forex markets. This adds further risk for aggressive USD/JPY bulls.
### Technical Outlook for USD/JPY:
The USD/JPY pair has faced consistent resistance near the 152 area, a level historically associated with Japanese intervention. As of mid-2024, the pair trades above 155, but with momentum waning and speculation around Fed easing intensifying, a downside correction appears likely.
**Key support levels to watch include:**
– 150.00: Psychological and intervention-sensitive zone
– 147.60: Previous swing low from late 2023
– 145.00: Strong support base; potential neckline in a medium-term head and shoulders pattern
– 140.00: Longer-term trendline support and pivotal round number
**Key resistance levels include:**
– 155.00: Recent highs and short-term barrier to further gains
– 157.00–158.00: YTD peak and potential exhaustion zone if price extends higher short term
If the Fed initiates rate cuts and U.S. yields decline further, the USD could lose its edge over the Yen. A break below 145 could mark a significant trend reversal in the pair and even trigger stop-loss selling, further exacerbating downside pressure.
### Potential Scenarios for USD/JPY Going Forward:
1. **Bullish Scenario:**
– Fed delays cuts or inflation rebounds
– BoJ maintains ultra-dovish stance
– USD/JPY retests 157–158 and possibly breaks higher
2
Explore this further here: USD/JPY trading.