empty
23.05.2025 01:52 PM
USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed the price up to 148.66. Within just a few weeks, traders made a nearly 900-point dash, taking advantage of yen weakness and a strengthening dollar. However, USD/JPY buyers failed to hold their ground, retreating more than 500 points in just two days and currently heading toward the lower 143.00 zone.

This image is no longer relevant

The yen strengthened following today's inflation data from Japan. Every component of the report landed in the green zone. For instance, the overall Consumer Price Index remained at 3.6% in April, the same as in March, while most analysts had expected a slight decline to 3.4%.

The core CPI, excluding fresh food, jumped to 3.5%, the highest growth rate since January 2023.

The CPI excluding energy and food (closely watched by the Bank of Japan) rose to 3.0% from the previous 2.9%.

Reacting to the report, USD/JPY bears resumed the southern trend after Thursday's corrective spike. On Thursday, the pair's buyers launched a counterattack, fueled by temporary US dollar strength. The greenback found support in the US manufacturing PMI, which unexpectedly remained in expansionary territory above the 50-point threshold. While analysts had forecast a drop from 50.2 in April to 49.9 in May, the index came in at 52.3. This result helped USD/JPY stage a modest pullback to 144.40.

However, sellers have since regained control. The moment of glory for the dollar ended. The US dollar index dropped back into the 99.00 zone, while the yen continued to strengthen across the board, supported by Japan's rising core inflation.

Today's inflation report increases the likelihood that the Bank of Japan will raise interest rates at one of its upcoming meetings either in June or July. ING analysts, for example, are confident the BoJ will hike by 25 basis points in July, as core inflation remains well above the central bank's target.

These hawkish expectations are based not only on elevated consumer inflation. Japanese central bank officials have also signaled readiness to act. Policy Board member Asahi Noguchi and Deputy Governor Shinichi Uchida recently hinted clearly that the central bank is prepared to take further steps to normalize monetary policy.

Hawkish sentiment was also bolstered by Thursday's machine tool orders data from Japan. Orders in March jumped 13% month-over-month, while analysts had forecast a 1.5% decline. This was the strongest result since November 2020. On a year-over-year basis, orders surged 8.4%, up from 1.5%. Since this indicator is a key leading gauge of capital investment over the next 6–9 months, it may serve as an additional argument for a hawkish BoJ decision in the near future.

Still, the USD/JPY downtrend is not driven solely by rate hike expectations. The yen is also benefiting from safe-haven demand as US-China tensions remain high. On one hand, bilateral dialogue continues. A phone call between deputy foreign ministers took place on May 22. On the other hand, trade talks are stalling, and new flashpoints are emerging. For example, Beijing recently threatened legal action against any parties complying with US restrictions (imposed May 13) on Huawei's chip production. China also urged Washington to abandon the "Iron Dome" missile defense system, claiming it violates the peaceful use of space. The White House has so far ignored the request, at least publicly.

Thus, the current fundamental backdrop supports the continuation of the USD/JPY downtrend. Technical analysis also suggests the same. On all higher timeframes (H4 and above), the price is situated between the middle and lower bands of the Bollinger Bands indicator, and also below all Ichimoku lines (except on the MN timeframe). On the daily chart, the Ichimoku indicator has formed a bearish "Line Parade" signal.

The first bearish target is 142.90 (lower Bollinger Band on the H4 chart). The main target lies at 141.30 (lower Bollinger Band on the daily chart).

Irina Manzenko,
Analytical expert of InstaTrade
© 2007-2025

Recommended Stories

GBP/JPY. Analysis and Forecast

During the European session on Monday, the GBP/JPY currency pair is approaching the 198.30 level. The pair finds some support from UK housing data: in June, house prices rose

Irina Yanina 19:40 2025-07-07 UTC+2

XAU/USD. Geopolitical Risks May Provide Additional Support to the Safe-Haven Precious Metal

Today, gold is displaying an intraday bearish tone despite rebounding from the $3300 level. Strengthening demand for the US dollar remains the primary factor pressuring gold, limiting its upward movement

Irina Yanina 19:09 2025-07-07 UTC+2

Bitcoin leads turbulent life

Beneath the calm surface of BTC/USD lie turbulent underwater currents that are reshaping the cryptocurrency market structure. Still waters run deep. On the surface, it seems that life

Marek Petkovich 15:48 2025-07-07 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair maintains a bullish bias, staying above the psychological level of 145.00, reflecting intraday selling pressure on the Japanese yen amid U.S. dollar strength. Investors are concerned that

Irina Yanina 12:59 2025-07-07 UTC+2

USD/CAD. Analysis and Forecast

On Monday, the USD/CAD pair continued its upward movement for the second day in a row. This rise is driven by a combination of factors. Crude oil prices initially declined

Irina Yanina 12:39 2025-07-07 UTC+2

GBP/USD. Analysis and Forecast

The GBP/USD pair began the new week attempting to hold the key psychological level of 1.3600. However, amid mixed fundamental factors, it has not been successful so far. The British

Irina Yanina 12:14 2025-07-07 UTC+2

Three days left to avert tariffs

As July 9, the deadline set by Trump, approaches, the United States main trading partners spent the weekend rushing to finalize trade agreements or lobbying for more time. Meanwhile, Treasury

Jakub Novak 11:24 2025-07-07 UTC+2

Investors see no alternatives

Uncertainty is commonly the enemy of investment, but not in 2025. A double dose of unpredictability – from geopolitics and White House tariffs – hasn't stopped the S&P 500 from

Marek Petkovich 11:17 2025-07-07 UTC+2

What to Watch on July 7th? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic publications are scheduled for Monday, and none of them are significant. Let us recall that Friday was practically a semi-holiday, as the United States celebrated Independence

Paolo Greco 08:29 2025-07-07 UTC+2

GBP/USD Overview on July 7, 2025

The GBP/USD currency pair remained nearly flat throughout Friday, as the U.S. trading session was essentially inactive on that day. There were no macroeconomic publications, and the market chose

Paolo Greco 07:25 2025-07-07 UTC+2
Can't speak right now?
Ask your question in the chat.
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaTrade anyway.

We are sorry for any inconvenience caused by this message.