The Japanese Yen (JPY) remains under pressure against the US Dollar (USD), consolidating near a three-week low on Tuesday as investors await the key US CPI inflation report. The USD/JPY pair is holding firm near 147.80, with bulls gaining strength amid reduced expectations for a Bank of Japan (BoJ) rate hike and rising geopolitical uncertainty.
🔹 US CPI in Focus as Fed Outlook Drives USD Demand
Markets are now laser-focused on the release of June’s US Consumer Price Index (CPI), which could set the tone for the Federal Reserve’s policy path going forward. Economists expect:
- Headline CPI (YoY): 2.7%
- Core CPI (YoY): 3.0%
A stronger-than-expected reading could bolster the USD further, as it may reinforce the Fed’s stance on keeping rates elevated to combat inflation fueled by tariffs and a tight labor market.
🔸 Trade Tensions and BoJ Dovishness Weigh on JPY
The Japanese Yen continues to struggle as sentiment around the BoJ turns increasingly dovish. Multiple factors are undermining the Yen’s safe-haven appeal:
- US President Donald Trump has proposed a 25% tariff on Japanese imports starting August 1, raising concerns over Japan’s economic growth and inflation trajectory.
- Trump softened his tone slightly on Monday, suggesting openness to further trade talks—but geopolitical uncertainty lingers.
- BoJ rate hike expectations have weakened, with policymakers likely to stay accommodative amid external risks.
🏛️ Domestic Political Risks Add Pressure
Adding to the Yen’s woes, Japanese political uncertainty is rising:
- PM Shigeru Ishiba’s coalition risks losing its upper house majority in the July 20 election, as recent polls suggest his LDP party may secure just 35 seats.
- This could disrupt Japan’s fiscal direction and strain the BoJ’s policy flexibility.
- Meanwhile, 10-year JGB yields have surged to 1.595%, the highest since October 2008, reflecting mounting fiscal concerns.
💹 Technical Outlook – USD/JPY Eyes Break Above 148.00
The pair is currently trading near 147.80 after clearing the 100-day SMA and maintaining momentum above the key 147.00 handle.
✅ Upside Targets:
- Immediate Resistance: 148.00 (June swing high)
- Next Level: 148.65 (May high)
- Psychological Level: 149.00
Momentum indicators support further gains, with RSI not yet overbought. A decisive break above 148.00 would likely fuel a move toward 149.00 in the near term.
🔻 Downside Supports:
- First Support: 147.20–147.15 zone
- Critical Support: 147.00
- Deeper Support Zones: 146.55 → 146.00 → 145.80 (100-day SMA)
- Bearish Trigger Point: 145.00 psychological level
Any pullback is likely to find demand at the 147.00–146.50 region. Only a break below 145.80 would signal a shift toward bearish control.
🧠 Conclusion: Yen Weakness to Persist Without a Hawkish BoJ Shift
The USD/JPY pair remains biased to the upside as the US Dollar benefits from hawkish Fed expectations and safe-haven flows amid rising global uncertainty. Meanwhile, the Japanese Yen remains weighed down by weak rate hike prospects and political instability.
All eyes now turn to the US CPI data, which could unlock the next decisive move for USD/JPY.
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