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 InstaForex
© 2007-2025
Summary
Urgency
Analytic
Irina Manzenko
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

At this stage, the Japanese yen has paused its decline against the US dollar. However, further strengthening of the yen in the near term appears unlikely. The key factors influencing

Irina Yanina 20:47 2025-07-16 UTC+2

AUD/JPY. Analysis and Forecast

On Wednesday, the AUD/JPY pair is attracting buyers, even though the Japanese yen remains relatively weak due to domestic political uncertainty. Moreover, according to polls, Japan's ruling coalition—the Liberal Democratic

Irina Yanina 13:04 2025-07-16 UTC+2

GBP/USD: Analysis and Forecast

Today, the GBP/USD pair is attempting to regain positive momentum and rise above the key psychological level of 1.3400, aiming to break a multi-day losing streak. However, spot prices remain

Irina Yanina 12:51 2025-07-16 UTC+2

The EU Needs a Deal with the US—But Not at Any Cost

The euro continues to weaken against the US dollar, even though some European politicians are no longer as soft in their statements as they once were. In an interview, Bundesbank

Jakub Novak 12:46 2025-07-16 UTC+2

Trump Prepares Tariffs on Semiconductors and Pharmaceuticals

Yesterday, the U.S. stock market declined, while the U.S. dollar strengthened further following President Donald Trump's announcement that he plans to impose tariffs on pharmaceutical products and semiconductors

Jakub Novak 12:33 2025-07-16 UTC+2

Trump's Policy Supports the Dollar (EUR/USD and GBP/USD May Resume Their Decline)

The U.S. consumer inflation report released yesterday showed that Donald Trump's policy to "make America great again" is, for now, mainly making life in America more expensive. According

Pati Gani 09:51 2025-07-16 UTC+2

The Market Failed to Hold Its Peak

Markets have started selling the news. Combined with the impact of tariffs showing up in U.S. inflation data, this prevented the S&P 500 from holding at its record high

Marek Petkovich 09:51 2025-07-16 UTC+2

U.S. Inflation Puts Pressure on the Fed

The U.S. dollar rose yesterday against a number of risk assets, despite core inflation in June rising less than expected. Inflation has been increasing for the fifth consecutive month

Jakub Novak 09:24 2025-07-16 UTC+2

What to Pay Attention to on July 16? A Breakdown of Fundamental Events for Beginners

Several macroeconomic releases are scheduled for Wednesday. The most important report is the UK inflation data, which will be published within the hour. While we do not believe this report

Paolo Greco 07:30 2025-07-16 UTC+2

GBP/USD Overview – July 16. "The Devil Is Not as Scary as He Is Painted"

The GBP/USD currency pair has been in a downtrend for the past few weeks, raising some questions. Yes, if we switch to the daily (24-hour) timeframe, the current strong downward

Paolo Greco 04:22 2025-07-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

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 InstaForex anyway.

We are sorry for any inconvenience caused by this message.