The market focuses on the decisions of the two central banks. Is it difficult for the yen to find bullish support?
2025-07-28 20:40:52
Before the U.S. market opened on Monday (July 28), the U.S. dollar fluctuated higher against the Japanese yen, with the exchange rate trading around 148.10, approaching the upper pressure level of the Bollinger Band, and the technical side showed a phased rebound pattern.
The shift in trade policy between the United States and Europe has brought important variables to the foreign exchange market this week. US President Trump and European Commission President von der Leyen reached an agreement on tariffs, and the final agreement significantly reduced the import tax rate of EU products from the previously expected 30% to 15%. This move not only increased the attractiveness of the US dollar, but also eased the market's concerns about external demand shocks. More importantly, the agreement is accompanied by the EU's commitment to invest 600 billion euros in the United States and will expand its purchases of US natural gas and military equipment, which may provide fundamental support for the US dollar in the medium and long term.
Meanwhile, the market is focusing on the Fed's interest rate decision on Wednesday. Although the market generally expects the Fed to keep interest rates unchanged, the market has begun to revise its expectations for a rate cut in September against the backdrop of a robust job market and positive GDP expectations. This change has driven the return of dollar bulls. Analysts believe that if the initial value of the US second quarter GDP released on Wednesday is strong, it will inevitably further strengthen expectations of a "temporary rate cut" and support further strengthening of the dollar.
As for the yen, the Bank of Japan will announce its interest rate decision on Thursday. Although the Bank of Japan has recently verbally strengthened its expectations for rate hikes, the market generally believes that the policy will remain unchanged in this decision, considering the external uncertainties and weak domestic economic growth. The lack of commitment to actual actions has made the yen lack upward momentum, and it is still vulnerable to the fluctuations of the US dollar in the short term.
Observing the 4-hour candlestick chart of USD/JPY, the Bollinger Band indicator is in an "open" state, indicating that volatility has begun to rise. The exchange rate rebounded from the low point of 145.85, and continued to stand above the middle track 147.07 and the previous resistance area of 147.50, forming short-term support. The current price is approaching the upper track of the Bollinger Band 148.31. If it can effectively break through this level, it will further open up space and test the previous high 149.18 line resistance. However, analysts believe that if it encounters resistance and falls back, it is necessary to be alert to the possibility of retesting the support of the 147.50 area.
The MACD indicator shows a typical golden cross state, and the red column continues to rise, reflecting that the short-term bullish momentum is accumulating; the DIFF and DEA lines diverge upward, reinforcing the trend continuation signal. The RSI indicator also rose to 61.77, not entering the overbought zone, indicating that the exchange rate still has some room to rise. Overall, the analysis believes that the technical side is short-term bullish, but it is necessary to pay attention to the suppression performance of the 148.30~148.70 range.
The current market sentiment shows the structural characteristics of "risk recovery but mainly cautious". The US-EU tariff agreement has eased the concerns about trade frictions in the short term, increased market risk appetite, and the equity market rebounded, and safe-haven assets were under pressure. However, traders are still waiting to see the implementation of the dual policies of the Federal Reserve and the Bank of Japan this week, especially the policy wording of the Federal Reserve will directly affect the directional choice of the US dollar in the next stage.
Judging from the trend of the US dollar index, it has rebounded to around 98, and the market remains divided on its subsequent trend: on the one hand, if the economic data is strong and inflation stabilizes, it may further strengthen the expectation of "maintaining high interest rates for a longer period of time"; on the other hand, once the data is weak, the market will quickly re-price the possibility of a rate cut in September. Therefore, there are some short-term fluctuations in sentiment, and traders tend to maintain a range strategy before the data and policies are implemented.
The yen market was relatively calm, lacking sufficient policy highlights and failing to gain additional premium from its safe-haven attributes. Overall, market sentiment was tilted towards the US dollar, while the yen was on the passive side.
Short-term outlook:
The short-term trend of USD/JPY is upward. Analysts believe that if the Fed maintains stable policy and hawkish rhetoric this week, and GDP data records growth, the exchange rate is expected to break through 148.70 and challenge the previous high of 149.18; but the technology is facing suppression from the near resistance band. If the upward momentum is blocked, it may fall into the range around 147.50 again.
Long-term outlook:
In the long run, the strong foundation of the US dollar still depends on the policy path of the Federal Reserve and economic fundamentals. Analysts believe that if the US economy maintains resilience in the second half of the year, high interest rates will become the core logic supporting the US dollar, and the US dollar against the Japanese yen is expected to maintain its upward trend and challenge the 150 integer mark; on the contrary, if inflation data falls or unemployment rate rises, the market will re-price the easing expectations, and the US dollar against the Japanese yen may usher in a phased correction, with the target position focusing on the 147 mark near the middle track of the Bollinger Band and the previous low of 145.80 below.
With the current international situation and monetary policy at a critical juncture, traders need to pay close attention to marginal changes in macro data and central bank wording to avoid biased trend judgments.
Fundamentals:
The shift in trade policy between the United States and Europe has brought important variables to the foreign exchange market this week. US President Trump and European Commission President von der Leyen reached an agreement on tariffs, and the final agreement significantly reduced the import tax rate of EU products from the previously expected 30% to 15%. This move not only increased the attractiveness of the US dollar, but also eased the market's concerns about external demand shocks. More importantly, the agreement is accompanied by the EU's commitment to invest 600 billion euros in the United States and will expand its purchases of US natural gas and military equipment, which may provide fundamental support for the US dollar in the medium and long term.
Meanwhile, the market is focusing on the Fed's interest rate decision on Wednesday. Although the market generally expects the Fed to keep interest rates unchanged, the market has begun to revise its expectations for a rate cut in September against the backdrop of a robust job market and positive GDP expectations. This change has driven the return of dollar bulls. Analysts believe that if the initial value of the US second quarter GDP released on Wednesday is strong, it will inevitably further strengthen expectations of a "temporary rate cut" and support further strengthening of the dollar.
As for the yen, the Bank of Japan will announce its interest rate decision on Thursday. Although the Bank of Japan has recently verbally strengthened its expectations for rate hikes, the market generally believes that the policy will remain unchanged in this decision, considering the external uncertainties and weak domestic economic growth. The lack of commitment to actual actions has made the yen lack upward momentum, and it is still vulnerable to the fluctuations of the US dollar in the short term.
Technical aspects:
Observing the 4-hour candlestick chart of USD/JPY, the Bollinger Band indicator is in an "open" state, indicating that volatility has begun to rise. The exchange rate rebounded from the low point of 145.85, and continued to stand above the middle track 147.07 and the previous resistance area of 147.50, forming short-term support. The current price is approaching the upper track of the Bollinger Band 148.31. If it can effectively break through this level, it will further open up space and test the previous high 149.18 line resistance. However, analysts believe that if it encounters resistance and falls back, it is necessary to be alert to the possibility of retesting the support of the 147.50 area.
The MACD indicator shows a typical golden cross state, and the red column continues to rise, reflecting that the short-term bullish momentum is accumulating; the DIFF and DEA lines diverge upward, reinforcing the trend continuation signal. The RSI indicator also rose to 61.77, not entering the overbought zone, indicating that the exchange rate still has some room to rise. Overall, the analysis believes that the technical side is short-term bullish, but it is necessary to pay attention to the suppression performance of the 148.30~148.70 range.
Market sentiment observation:
The current market sentiment shows the structural characteristics of "risk recovery but mainly cautious". The US-EU tariff agreement has eased the concerns about trade frictions in the short term, increased market risk appetite, and the equity market rebounded, and safe-haven assets were under pressure. However, traders are still waiting to see the implementation of the dual policies of the Federal Reserve and the Bank of Japan this week, especially the policy wording of the Federal Reserve will directly affect the directional choice of the US dollar in the next stage.
Judging from the trend of the US dollar index, it has rebounded to around 98, and the market remains divided on its subsequent trend: on the one hand, if the economic data is strong and inflation stabilizes, it may further strengthen the expectation of "maintaining high interest rates for a longer period of time"; on the other hand, once the data is weak, the market will quickly re-price the possibility of a rate cut in September. Therefore, there are some short-term fluctuations in sentiment, and traders tend to maintain a range strategy before the data and policies are implemented.
The yen market was relatively calm, lacking sufficient policy highlights and failing to gain additional premium from its safe-haven attributes. Overall, market sentiment was tilted towards the US dollar, while the yen was on the passive side.
Outlook for the future:
Short-term outlook:
The short-term trend of USD/JPY is upward. Analysts believe that if the Fed maintains stable policy and hawkish rhetoric this week, and GDP data records growth, the exchange rate is expected to break through 148.70 and challenge the previous high of 149.18; but the technology is facing suppression from the near resistance band. If the upward momentum is blocked, it may fall into the range around 147.50 again.
Long-term outlook:
In the long run, the strong foundation of the US dollar still depends on the policy path of the Federal Reserve and economic fundamentals. Analysts believe that if the US economy maintains resilience in the second half of the year, high interest rates will become the core logic supporting the US dollar, and the US dollar against the Japanese yen is expected to maintain its upward trend and challenge the 150 integer mark; on the contrary, if inflation data falls or unemployment rate rises, the market will re-price the easing expectations, and the US dollar against the Japanese yen may usher in a phased correction, with the target position focusing on the 147 mark near the middle track of the Bollinger Band and the previous low of 145.80 below.
With the current international situation and monetary policy at a critical juncture, traders need to pay close attention to marginal changes in macro data and central bank wording to avoid biased trend judgments.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
