- USD/JPY rebounded 0.6% on Friday as the dollar strengthened.
- The pair gave a neat technical bounce from the main moving average.
- Markets are broadly returning to hopes of a Fed rate cut.
The USD/JPY pair rose on Friday, rising six-tenths of one percent, ending a two-day losing streak, as the US dollar finds broad market support and the USD-JPY pair strengthens from a fresh break of the 50-day EMA ( whatever).
The US dollar rose broadly on Friday as the greenback received support from lower US Treasury yields in the face of renewed bets on interest rate cuts by the Federal Reserve (Fed) in 2025. Key sections of US inflation numbers eased slightly over the week. , revitalizing hopes that price growth pressure will ease enough to push the Fed toward making interest rate cuts earlier in the first half of the year than previously expected.
The Bank of Japan is scheduled to announce its next interest rate early next Friday, with the typically hawkish central bank expected to raise interest rates by another 25 basis points. Results of the US Purchasing Managers’ Index (PMI) activity survey are also expected next Friday, but the run-up to major events is a remarkably sober spreadsheet, leaving investors to focus on courting policymakers.
USD/JPY price forecast
The USD/JPY pair made a tidy technical bounce from the 50-day moving average on Friday, rebounding from 155.00 and setting up US dollar bulls for a new high on the charts after snapping a two-day decline. The spot ceiling remains priced near the 159.00 level.
Even if the pair turns into a new bullish stance, there is still plenty of room to rise before the USD-JPY pair reaches record highs recorded in 2024 near 162.00. There is a strict limit to how high the dollar bulls can get before the Bank of Japan starts to get nervous again and moves its hand over the intervention button.
USD/JPY daily chart
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most widely traded currencies in the world. Their value is determined broadly by the performance of the Japanese economy, but more specifically by Bank of Japan policy, the spread between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the powers of the Bank of Japan is to control the currency, so its movements are key to the yen. The Bank of Japan has intervened directly in currency markets on occasion, generally to devalue the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The Bank of Japan’s ultra-loose monetary policy between 2013 and 2024 caused the yen to depreciate against its major currency counterparts due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual dismantling of this ultra-lenient policy has given the yen some support.
Over the past decade, the Bank of Japan’s ultra-loose monetary policy stance has led to widening policy divergence with other central banks, especially the US Federal Reserve. This supported the widening of the spread between the US and Japanese 10-year bonds, which favored the US dollar against the Japanese yen. The Bank of Japan’s decision in 2024 to gradually abandon ultra-loose policy, along with interest rate cuts at other major central banks, are narrowing this spread.
The Japanese yen is often viewed as a safe investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency because of its supposed reliability and stability. Turbulent times are likely to strengthen the value of the yen against other currencies that are considered riskier to invest in.
