During the Asian session on Friday, USD/JPY was little changed around the 145.40 region. It remained above that monthly high mark it touched just a day before. This stabilization in the currency pair occurs against a backdrop of diverging influences hitting the market in unison. Investors continue to read from a cautious playbook, balancing numerous economic barometers that may influence down-the-line trends.
On the chart, the USD/JPY has managed to close above Japan’s psychological level of 145.00 at least three times this week already, illustrating its impressive bullish intent. The market is in a very important inflection point. If it does manage to break above the last month’s high of ~145.45, that would be a signal to potentially trigger a new bullish USD/JPY rally. At the same time, oscillators on the daily time-frame are building up bullish momentum. This change is indicative of an environment in which USD/JPY spot rates should trend higher.
Forward analysts recommend that USD/JPY bulls aim for the 100-day Simple Moving Average (SMA). This SMA presently is marginally ahead of the big psychological round number of 147.00. Further recovery beyond the 145.75 vicinity would pave the way for retaking the 146.00 level. Unfortunately, that latter scenario now seems increasingly likely with the current market dynamics at play.
If USD/JPY weakens underneath the 145.00 psychological barrier, fresh buyers will probably pile in. This potential rush of buyers would likely be enough to provide strong support in the 144.50-144.45 area. The next significant USD/JPY support level lies at the 144.00 round number. It sells short the fundamental importance of these psychological fetters that distort trading strategies.
A potential Middle East flashpoint would increase that safe-haven demand for the JPY. This swell of demand risks capping any further upside potential for USD/JPY. Recent geopolitical tension continues to stoke uncertainty in global markets. In response, investors tend to rush into safe-haven assets such as the JPY for safety.
Yesterday, USD/JPY rallied after a move lower on the day. This move followed closely on the heels of the release of Japan’s bullish inflation numbers, underscoring the often complicated relationship between regional economic data and currency valuations. The Japanese Yen received a minor boost after a government report indicated that Japan’s annual National Consumer Price Index (CPI) remained significantly above the Bank of Japan’s (BoJ) 2% target in May. This data is very important as it shapes expectations for monetary policy, and thus USD/JPY movements.
After its two-day meeting on Wednesday the US central bank voted to maintain interest rates at their current level. This decision piles on top of a developing fiscal picture. It’s not news that tariffs, like those imposed by former President Trump, lead to inflation. This increased uncertainty is adding to the current volatility for the USD/JPY currency pair.
As traders assess their positions, some follow-through buying could facilitate a move towards the 147.40-147.45 intermediate hurdle, which would serve as a stepping stone towards reaching the 148.00 mark and ultimately targeting the 148.65 region, home to the May monthly swing high for USD/JPY.