The Fed's hawkish stance coupled with Japan's policy uncertainty pushed USD/JPY above 151, hitting an April high.
2025-08-01 14:14:36
The dollar rose above 151.20 against the yen in Asian trading on Friday, hitting a new high since the end of March, as the Federal Reserve's hawkish tone intensified and Japan's policy uncertainty continued to suppress the yen.
On Thursday, the Bank of Japan kept interest rates unchanged as expected, but Governor Kazuo Ueda struck a cautious tone in his post-meeting speech, emphasizing the need to observe the impact of changes in US tariffs on the Japanese economy, leading the market to lower expectations for short-term rate hikes.
Although the Bank of Japan raised its core CPI forecast for fiscal 2025 to 2.7% from 2.2% and retained the option of raising interest rates this year, the market interpreted the overall tone as dovish, putting pressure on the yen.
"The Bank of Japan has not provided a clear policy path, and coupled with the ruling coalition's defeat in the July 20 election, political uncertainty has exacerbated market concerns about Japan's fiscal health," said a foreign exchange strategist.
Meanwhile, the United States has sent a more resolute hawkish signal. Federal Reserve Chairman Powell made it clear on Wednesday that "it is still too early to say whether there will be a rate cut in September," and stressed that the current interest rate level is not dragging down the economy.
This stance is supported by the latest economic data. US GDP grew at an annualized rate of 3% in the second quarter, exceeding expectations. The PCE price index rose to 2.6% year-on-year in June, with the core PCE at 2.8%, also exceeding expectations of 2.7%. Personal income and spending both grew by 0.3%, further reinforcing market concerns about persistent inflation.
Against this backdrop, the US dollar index continued to be strong, rising to a high of more than two months this week, continuing to attract safe-haven and arbitrage funds.
US President Trump signed an executive order on Thursday to impose tariffs of up to 41% on major trading partners, bringing forward the implementation date to August 7. Although the uncertainty of this trade policy has provided support for some safe-haven assets, it is not enough to reverse the weakness of the yen.
On the daily chart, the USD/JPY exchange rate accelerated its upward trend after breaking through the 200-day moving average and the psychological level of 150.00, currently approaching the March high of 151.20. The RSI indicator is approaching overbought territory, suggesting a short-term technical correction. However, the overall trend remains bullish, and a correction could present a new buying opportunity.
Support levels to watch include the 150.00 mark and the 200-day moving average at 149.55. A break below this level could trigger a technical sell-off, pushing the price down to 149.00. However, as long as the price remains above these support levels, the upward trend is expected to continue, potentially testing the 152.00 level.
In the short term, market focus will shift to the upcoming release of the US July non-farm payrolls (NFP), with expectations for 110,000 new jobs and a slight rise in the unemployment rate to 4.2%. Furthermore, the US ISM Manufacturing PMI data will also be released simultaneously, which could further influence the US dollar's short-term performance.
Editor's opinion:
The current strong rebound of the USD/JPY not only benefits from the policy leadership of the Federal Reserve, but also reflects the dual negative factors of the unclear policy rhythm of the Bank of Japan and the turbulent domestic political structure.
If the US employment data remains solid, USD/JPY may open up further upside potential, with 152.00 becoming the next key test point.
On Thursday, the Bank of Japan kept interest rates unchanged as expected, but Governor Kazuo Ueda struck a cautious tone in his post-meeting speech, emphasizing the need to observe the impact of changes in US tariffs on the Japanese economy, leading the market to lower expectations for short-term rate hikes.
Although the Bank of Japan raised its core CPI forecast for fiscal 2025 to 2.7% from 2.2% and retained the option of raising interest rates this year, the market interpreted the overall tone as dovish, putting pressure on the yen.
"The Bank of Japan has not provided a clear policy path, and coupled with the ruling coalition's defeat in the July 20 election, political uncertainty has exacerbated market concerns about Japan's fiscal health," said a foreign exchange strategist.
Meanwhile, the United States has sent a more resolute hawkish signal. Federal Reserve Chairman Powell made it clear on Wednesday that "it is still too early to say whether there will be a rate cut in September," and stressed that the current interest rate level is not dragging down the economy.
This stance is supported by the latest economic data. US GDP grew at an annualized rate of 3% in the second quarter, exceeding expectations. The PCE price index rose to 2.6% year-on-year in June, with the core PCE at 2.8%, also exceeding expectations of 2.7%. Personal income and spending both grew by 0.3%, further reinforcing market concerns about persistent inflation.
Against this backdrop, the US dollar index continued to be strong, rising to a high of more than two months this week, continuing to attract safe-haven and arbitrage funds.
US President Trump signed an executive order on Thursday to impose tariffs of up to 41% on major trading partners, bringing forward the implementation date to August 7. Although the uncertainty of this trade policy has provided support for some safe-haven assets, it is not enough to reverse the weakness of the yen.
On the daily chart, the USD/JPY exchange rate accelerated its upward trend after breaking through the 200-day moving average and the psychological level of 150.00, currently approaching the March high of 151.20. The RSI indicator is approaching overbought territory, suggesting a short-term technical correction. However, the overall trend remains bullish, and a correction could present a new buying opportunity.
Support levels to watch include the 150.00 mark and the 200-day moving average at 149.55. A break below this level could trigger a technical sell-off, pushing the price down to 149.00. However, as long as the price remains above these support levels, the upward trend is expected to continue, potentially testing the 152.00 level.
In the short term, market focus will shift to the upcoming release of the US July non-farm payrolls (NFP), with expectations for 110,000 new jobs and a slight rise in the unemployment rate to 4.2%. Furthermore, the US ISM Manufacturing PMI data will also be released simultaneously, which could further influence the US dollar's short-term performance.
Editor's opinion:
The current strong rebound of the USD/JPY not only benefits from the policy leadership of the Federal Reserve, but also reflects the dual negative factors of the unclear policy rhythm of the Bank of Japan and the turbulent domestic political structure.
If the US employment data remains solid, USD/JPY may open up further upside potential, with 152.00 becoming the next key test point.
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