USD/JPY Price Forecast: Yen Poised to Break 153 Ahead of FED and BOJ Decisions
By TradingNews.com
The Japanese yen (JPY) is finding itself at a critical junction against the US dollar (USD), with the USD/JPY currency pair testing the 153.00 psychological resistance level. The movement in this pair is being influenced by numerous macroeconomic factors, predominantly driven by diverging monetary policy expectations from the US Federal Reserve (Fed) and the Bank of Japan (BoJ). While the Federal Reserve maintains a hawkish stance, the BoJ is gradually pivoting toward policy normalization, albeit cautiously.
As markets brace for pivotal updates from both central banks, traders and investors are closely watching for signs that could propel USD/JPY beyond the 153.00 mark or trigger a reversal.
Current Market Overview
– USD/JPY is hovering close to 153.00, showing strength as the US dollar benefits from hawkish Fed policy expectations.
– The Japanese yen continues to demonstrate weakness due to the BoJ’s slow pace in exiting from ultra-loose monetary policy.
– Markets are highly sensitive to interest rate expectations, and any narrative shifts from either central bank could significantly influence the direction of the yen.
Key Technical Levels
– The 153.00 level in USD/JPY represents a major psychological resistance, last approached in 2022.
– Beyond 153.00, traders may eye 155.00 as the next resistance, with historical context signaling potential interventions from Japanese authorities at these levels.
– On the downside, support lies near 150.60 and 149.40, levels that offered a base in past pullbacks.
The Federal Reserve’s Position
– The US Federal Reserve has maintained its hawkish sentiment, emphasizing the need for sustained progress on inflation before initiating rate cuts.
– Sticky inflation data and robust job numbers have caused market participants to revise their expectations concerning the number of rate cuts this year.
– Fed Chair Jerome Powell recently remarked that the central bank will need “greater confidence” that inflation is moving sustainably toward its 2 percent target before adjusting interest rates.
– As of now, markets are pricing in fewer rate cuts than initially anticipated, which has bolstered the yield on US Treasuries and, in turn, supported the US dollar.
Impact of US Economic Data
– February’s Core Personal Consumption Expenditures (Core PCE) price index, the Fed’s preferred inflation gauge, came in stronger than expected, reinforcing the Fed’s cautious stance.
– The March US Non-Farm Payrolls (NFP) report showed continued strength in hiring, reducing recession fears and supporting risk appetite, while keeping Fed rate cut prospects at bay.
– Retail sales and consumer sentiment remain resilient, offering additional support to the US economy and fortifying the USD outlook.
Bank of Japan’s Evolving Stance
– After years of conducting ultra-loose monetary policy, the Bank of Japan finally ended its negative interest rate policy in March by raising rates for the first time since 2007, hiking them from -0.1% to around 0%.
– This shift marked a historic turning point, but the BoJ has reiterated its intent to maintain accommodative financial conditions moving forward.
– Governor Kazuo Ueda emphasized that any future policy tightening will be gradual, and that inflation must remain sustainably above target for further rate hikes to occur.
– Wages and inflation expectations are being closely monitored, especially in the context of the annual Shunto spring wage negotiations.
Japanese Economy and Inflation Indicators
– Inflation in Japan is running slightly above the 2 percent target, though the BoJ remains cautious about declaring goal sustainability.
– Recent wage negotiations have delivered strong hikes, which may bolster consumption and future price pressures. However, the impact may take time to reflect in official inflation figures.
– GDP growth remains moderate, and policymakers are careful not to undermine the recovery by tightening too quickly.
Yen-Specific Drivers and Intervention Concerns
– Escalating USD
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