The Japanese Yen (JPY) edged higher from a one-week low against the US Dollar (USD) in Monday’s Asian session, though the upside remains limited. Market sentiment has shifted toward risk-on following the US-EU trade deal and optimism surrounding extended US-China tariff negotiations. This has reduced demand for safe-haven assets like the Yen, even as speculation builds over potential monetary policy shifts from the Bank of Japan (BoJ).
At the same time, the US Dollar remains subdued, capping upside for the USD/JPY pair, which trades just above 148.00. Traders appear cautious ahead of this week’s dual central bank updates — the US Federal Reserve on Wednesday and the BoJ on Thursday — both of which are expected to keep rates unchanged while offering fresh forward guidance.
Mixed Fundamentals Weigh on Yen Sentiment
While Japan’s recent trade agreement with the US reduces economic uncertainty and fuels speculation of a BoJ policy tightening later this year, several headwinds persist for the JPY. Inflation in Tokyo eased more than expected in July, dampening immediate rate hike bets. Meanwhile, political instability following a major electoral setback for Japan’s ruling coalition adds further hesitation.
On the other side, the US Dollar holds recent gains, with DXY trading steady despite reduced volatility. Strong US labor data and improving business activity have helped cushion the Greenback. However, the Fed’s looming policy announcement and key macro data — including Q2 GDP, PCE inflation, and Nonfarm Payrolls — are likely to drive the next move in USD/JPY.
USD/JPY Technical Outlook: 148.65 and 149.00 in Sight?
Technically, USD/JPY remains supported by the 200-hour SMA and recent Fibonacci retracement levels. A confirmed daily close above the 148.00 mark would validate a bullish continuation toward 148.65, with potential to challenge the psychological 149.00 barrier if momentum persists.
Immediate Resistance Levels:
- 148.65 – July swing high
- 149.00 – Key psychological barrier
Key Support Zones:
- 147.70–147.65 – 100-hour SMA and 23.6% Fib retracement
- 146.70 – 38.2% Fib retracement
- 146.55 – 100-day SMA
- 145.75 – July 10 low
- 145.15 – 61.8% Fib support
A drop below 146.55 could signal deeper losses, potentially testing 145.00.
Key Events to Watch This Week:
- Wednesday: Fed rate decision & Q2 GDP (US)
- Thursday: BoJ policy update & PCE inflation data
- Friday: US Nonfarm Payrolls
With central bank divergence and geopolitical trade themes at play, the USD/JPY pair is set for increased volatility in the days ahead.
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