USD/JPY rebounded but was blocked. We will focus on whether the BoJ policy signals and US PCE inflation data will drive USD/JPY to break upward.
2025-07-31 14:01:41
The yen strengthened in Asian trading on Thursday, boosted by improving domestic economic data and rising market expectations for Bank of Japan policy.
Data showed that Japan's industrial output grew 1.7% month-over-month in June, exceeding market expectations, while retail sales recorded year-over-year growth of 2.0%, marking the 39th consecutive month and better than the previously revised 1.9%. This reflects the continued resilience of Japan's manufacturing sector and the fact that consumption has not slowed significantly due to high inflation.
"The data reinforced market expectations for a Bank of Japan rate hike this year, while also triggering some position adjustments," said Toru Sasaki, a foreign exchange strategist at Mizuho Securities in Tokyo.
The market is closely watching the upcoming Bank of Japan (BoJ) interest rate decision and policy outlook. Although interest rates are expected to remain unchanged at this meeting, BoJ Governor Kazuo Ueda's speech will be seen as a forward signal of future policy tightening.
In addition, the recent defeat of the ruling party in local elections has also increased fiscal policy uncertainty, which may make the BoJ more cautious in promoting policy normalization.
Meanwhile, hawkish US policies continue to support the dollar. The Federal Reserve held interest rates steady, but for the first time since 1993, two officials dissented from pausing rate hikes, highlighting the Fed's continued bias toward raising rates. Chairman Powell stated after the meeting: "It is premature to talk about a September rate cut. Current policies are not yet inhibiting economic growth."
U.S. macroeconomic data showed that the annualized GDP growth in the second quarter reached 3.0%, and the ADP employment report also showed that private employment growth exceeded expectations, both reflecting that the U.S. economy remains resilient.
From a technical perspective, USD/JPY retreated after hitting the 200-day simple moving average (around 149.55). This moving average has become a strong short-term resistance. If it fails to break through, the price may enter a short-term consolidation or correction phase.
A break above 149.55 could lead to a quick test of the 150.00 psychological level, with further targets at the 150.40 and 151.00 areas.
The support levels below are 148.55, 148.00 and 147.80 (yesterday's low). If they fall below, the possibility of a pullback to 147.00 or even the 100-day moving average (146.70) and a test below 145.90 will be opened.
The current MACD indicator continues to rise, showing that the bullish momentum has not been completely lost, but there is pressure to take profits in the short term.
"Even with strong Japanese data, the downside for USD/JPY is limited given the uncertainty surrounding BoJ policy and the Fed's firm stance. The market will be guided by the PCE inflation data and the BoJ statement." - Mika Tanaka, head of FX research at JPMorgan in Tokyo
Editor's opinion:
In the short term, the yen has strengthened slightly due to positive domestic economic data, but the sustainability of its appreciation still depends on whether the Bank of Japan signals policy tightening. In contrast, US economic fundamentals and policy expectations are both bullish for the US dollar.
Technically, USD/JPY is facing resistance at its 200-day moving average, but strong support is emerging below, suggesting a consolidation pattern. We will focus on whether BoJ Governor Ueda's speech will shed light on the timetable for rate hikes, and whether tonight's US PCE data will reinforce expectations of a longer-term Fed policy path of higher interest rates.
Data showed that Japan's industrial output grew 1.7% month-over-month in June, exceeding market expectations, while retail sales recorded year-over-year growth of 2.0%, marking the 39th consecutive month and better than the previously revised 1.9%. This reflects the continued resilience of Japan's manufacturing sector and the fact that consumption has not slowed significantly due to high inflation.
"The data reinforced market expectations for a Bank of Japan rate hike this year, while also triggering some position adjustments," said Toru Sasaki, a foreign exchange strategist at Mizuho Securities in Tokyo.
The market is closely watching the upcoming Bank of Japan (BoJ) interest rate decision and policy outlook. Although interest rates are expected to remain unchanged at this meeting, BoJ Governor Kazuo Ueda's speech will be seen as a forward signal of future policy tightening.
In addition, the recent defeat of the ruling party in local elections has also increased fiscal policy uncertainty, which may make the BoJ more cautious in promoting policy normalization.
Meanwhile, hawkish US policies continue to support the dollar. The Federal Reserve held interest rates steady, but for the first time since 1993, two officials dissented from pausing rate hikes, highlighting the Fed's continued bias toward raising rates. Chairman Powell stated after the meeting: "It is premature to talk about a September rate cut. Current policies are not yet inhibiting economic growth."
U.S. macroeconomic data showed that the annualized GDP growth in the second quarter reached 3.0%, and the ADP employment report also showed that private employment growth exceeded expectations, both reflecting that the U.S. economy remains resilient.
From a technical perspective, USD/JPY retreated after hitting the 200-day simple moving average (around 149.55). This moving average has become a strong short-term resistance. If it fails to break through, the price may enter a short-term consolidation or correction phase.
A break above 149.55 could lead to a quick test of the 150.00 psychological level, with further targets at the 150.40 and 151.00 areas.
The support levels below are 148.55, 148.00 and 147.80 (yesterday's low). If they fall below, the possibility of a pullback to 147.00 or even the 100-day moving average (146.70) and a test below 145.90 will be opened.
The current MACD indicator continues to rise, showing that the bullish momentum has not been completely lost, but there is pressure to take profits in the short term.
"Even with strong Japanese data, the downside for USD/JPY is limited given the uncertainty surrounding BoJ policy and the Fed's firm stance. The market will be guided by the PCE inflation data and the BoJ statement." - Mika Tanaka, head of FX research at JPMorgan in Tokyo
Editor's opinion:
In the short term, the yen has strengthened slightly due to positive domestic economic data, but the sustainability of its appreciation still depends on whether the Bank of Japan signals policy tightening. In contrast, US economic fundamentals and policy expectations are both bullish for the US dollar.
Technically, USD/JPY is facing resistance at its 200-day moving average, but strong support is emerging below, suggesting a consolidation pattern. We will focus on whether BoJ Governor Ueda's speech will shed light on the timetable for rate hikes, and whether tonight's US PCE data will reinforce expectations of a longer-term Fed policy path of higher interest rates.
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