149.53 becomes the key defense line, and the upward momentum of USD/JPY weakens
2025-07-31 15:58:03
On Thursday (July 31st), the USD/JPY exchange rate retreated slightly from its peak, trading around 149.30 during the European session. While the US Federal Reserve maintained interest rates unchanged and signaled hawkishness in the previous session, which led to short-term strength in the dollar, the combined impact of the Bank of Japan's policy meeting rhetoric and economic data contributed to short-term strength in the yen, putting downward pressure on the exchange rate. Overall, the USD/JPY pair is consolidating amidst the interplay of multiple macroeconomic factors, and technically, is approaching key resistance levels.
The Bank of Japan (BoJ) maintained its policy rate unchanged in its July meeting, with its short-term target rate remaining in the 0.40%-0.50% range. This marked the fourth consecutive meeting where the bank has paused rate hikes, continuing its wait-and-see approach since the beginning of the year. Despite this, the central bank raised its inflation forecast, raising its core CPI forecast for fiscal 2025 from 2.2% to 2.7%, suggesting that there may still be room for policy tightening this year.
At a press conference after the meeting, Bank of Japan Governor Kazuo Ueda stated that Japan's economy is recovering moderately, and the trade agreement with the United States has reduced macroeconomic uncertainty. Meanwhile, industrial output grew 1.7% month-over-month in June, and retail sales increased 2.0% year-over-year, demonstrating the resilience of domestic demand. These positive signals further reinforce expectations for further Bank of Japan interest rate hikes, supporting the yen's strength.
In the United States, although the Federal Open Market Committee (FOMC) kept interest rates unchanged this week, Chairman Powell stated that current policy remains moderately restrictive and that a September rate cut is premature. ADP employment figures for July exceeded expectations by 104,000, and annualized GDP growth reached 3.0%, significantly better than the previous reading. Strong economic fundamentals are supporting the US dollar.
However, with positive data from Japan and rising expectations of interest rate hikes, the short-term rise of USD/JPY has been suppressed, and the market is awaiting further guidance from the PCE price index in the North American session.
The USD/JPY exchange rate is currently trading below the upper Bollinger Band (150.373), approaching the intraday high of 149.532, forming short-term resistance. The candlestick chart shows that a series of consecutive bullish candlesticks have pushed the price near the previous high, indicating an overheated short-term rally, approaching technical overbought territory.
The MACD indicator continues to run above the zero axis, with the fast line (DIFF) at 0.908, higher than the slow line (DEA) at 0.784. The RSI (14) indicator is at 63.10. Although it has not yet entered the typical overbought zone (above 70), it is already at a relatively high level. Combined with the resistance of the high point of 149.532, short-term technical correction pressure is accumulating.
Support analysis shows that strong support is located near the middle track of the Bollinger band at 146.711; but if the price breaks through 149.532 and stabilizes, it will open up upward space to 151 and the previous high of 151.207; on the contrary, if it is blocked and falls below the 149 mark, it may trigger a short-term technical adjustment.
Market sentiment has recently diverged between strong US economic data and the Bank of Japan's hawkish stance. On the one hand, US macroeconomic data has consistently exceeded expectations, bolstering market confidence in a soft landing and maintaining the resilience of US dollar bulls. On the other hand, while the Bank of Japan refrained from raising interest rates, it raised its inflation forecasts and economic assessment, prompting yen shorts to begin taking profits.
At the same time, on the technical level, the exchange rate is approaching key resistance, MACD momentum is weakening, and RSI is entering a high area. Some traders have begun to reduce their positions and wait and see, and the market has entered a short-term long-short stalemate pattern.
In the options market, implied volatility has risen, reflecting heightened uncertainty about the future direction of the exchange rate. Combined with recent political turmoil in Japan and the uncertainty surrounding the medium- to long-term inflation path, market sentiment is currently leaning toward cautious optimism.
Short-term outlook:
In the short term, USD/JPY is expected to consolidate within the 149.00 to 150.00 range. If tonight's PCE data is strong, the pair could potentially push towards the 150 mark. However, the previous high of 149.532 presents strong resistance, prompting caution against technical pullbacks after a failed breakout. In the event of a pullback, focus on the ability of bulls to defend the 146.711 to 146.00 range.
Medium-term outlook:
From a medium-term perspective, analysts believe that if US data continues to be strong and the Bank of Japan remains conservative in raising interest rates, the USD/JPY pair is expected to continue its upward trend and challenge the previous high of 151.207; but if subsequent Japanese economic data is strong and drives the BoJ to accelerate policy normalization, the exchange rate may enter a medium-term top construction stage and fluctuate back to the 146-143 range.
Overall, the analysis believes that under the dual influence of the shift in yen policy expectations and the continued bullish momentum of the US dollar, the future trend of the exchange rate needs to be further confirmed by the breakthrough or reversal signal of key technical levels.
Fundamentals
The Bank of Japan (BoJ) maintained its policy rate unchanged in its July meeting, with its short-term target rate remaining in the 0.40%-0.50% range. This marked the fourth consecutive meeting where the bank has paused rate hikes, continuing its wait-and-see approach since the beginning of the year. Despite this, the central bank raised its inflation forecast, raising its core CPI forecast for fiscal 2025 from 2.2% to 2.7%, suggesting that there may still be room for policy tightening this year.
At a press conference after the meeting, Bank of Japan Governor Kazuo Ueda stated that Japan's economy is recovering moderately, and the trade agreement with the United States has reduced macroeconomic uncertainty. Meanwhile, industrial output grew 1.7% month-over-month in June, and retail sales increased 2.0% year-over-year, demonstrating the resilience of domestic demand. These positive signals further reinforce expectations for further Bank of Japan interest rate hikes, supporting the yen's strength.
In the United States, although the Federal Open Market Committee (FOMC) kept interest rates unchanged this week, Chairman Powell stated that current policy remains moderately restrictive and that a September rate cut is premature. ADP employment figures for July exceeded expectations by 104,000, and annualized GDP growth reached 3.0%, significantly better than the previous reading. Strong economic fundamentals are supporting the US dollar.
However, with positive data from Japan and rising expectations of interest rate hikes, the short-term rise of USD/JPY has been suppressed, and the market is awaiting further guidance from the PCE price index in the North American session.
Technical aspects:
The USD/JPY exchange rate is currently trading below the upper Bollinger Band (150.373), approaching the intraday high of 149.532, forming short-term resistance. The candlestick chart shows that a series of consecutive bullish candlesticks have pushed the price near the previous high, indicating an overheated short-term rally, approaching technical overbought territory.
The MACD indicator continues to run above the zero axis, with the fast line (DIFF) at 0.908, higher than the slow line (DEA) at 0.784. The RSI (14) indicator is at 63.10. Although it has not yet entered the typical overbought zone (above 70), it is already at a relatively high level. Combined with the resistance of the high point of 149.532, short-term technical correction pressure is accumulating.
Support analysis shows that strong support is located near the middle track of the Bollinger band at 146.711; but if the price breaks through 149.532 and stabilizes, it will open up upward space to 151 and the previous high of 151.207; on the contrary, if it is blocked and falls below the 149 mark, it may trigger a short-term technical adjustment.
Market sentiment observation:
Market sentiment has recently diverged between strong US economic data and the Bank of Japan's hawkish stance. On the one hand, US macroeconomic data has consistently exceeded expectations, bolstering market confidence in a soft landing and maintaining the resilience of US dollar bulls. On the other hand, while the Bank of Japan refrained from raising interest rates, it raised its inflation forecasts and economic assessment, prompting yen shorts to begin taking profits.
At the same time, on the technical level, the exchange rate is approaching key resistance, MACD momentum is weakening, and RSI is entering a high area. Some traders have begun to reduce their positions and wait and see, and the market has entered a short-term long-short stalemate pattern.
In the options market, implied volatility has risen, reflecting heightened uncertainty about the future direction of the exchange rate. Combined with recent political turmoil in Japan and the uncertainty surrounding the medium- to long-term inflation path, market sentiment is currently leaning toward cautious optimism.
Market outlook:
Short-term outlook:
In the short term, USD/JPY is expected to consolidate within the 149.00 to 150.00 range. If tonight's PCE data is strong, the pair could potentially push towards the 150 mark. However, the previous high of 149.532 presents strong resistance, prompting caution against technical pullbacks after a failed breakout. In the event of a pullback, focus on the ability of bulls to defend the 146.711 to 146.00 range.
Medium-term outlook:
From a medium-term perspective, analysts believe that if US data continues to be strong and the Bank of Japan remains conservative in raising interest rates, the USD/JPY pair is expected to continue its upward trend and challenge the previous high of 151.207; but if subsequent Japanese economic data is strong and drives the BoJ to accelerate policy normalization, the exchange rate may enter a medium-term top construction stage and fluctuate back to the 146-143 range.
Overall, the analysis believes that under the dual influence of the shift in yen policy expectations and the continued bullish momentum of the US dollar, the future trend of the exchange rate needs to be further confirmed by the breakthrough or reversal signal of key technical levels.
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- 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.
