The uncertain outlook of the Bank of Japan's policy and the expected interest rate cut by the Federal Reserve are balancing the dollar's rebound against the yen.
2025-08-12 13:31:33
The yen continued to weaken on Tuesday, with USD/JPY surging to around 148.50 during Asian trading hours, a 1-1/2-week high. Market expectations that the Bank of Japan may delay further policy normalization due to domestic political uncertainty and the potential impact of higher tariffs weighed on the yen. Meanwhile, a rebound in risk appetite in global stock markets weakened the yen's safe-haven appeal.
At its July meeting, the Bank of Japan raised its inflation forecasts and reiterated its intention to raise interest rates further if growth and inflation meet expectations. This marked a significant divergence from market expectations that the Federal Reserve would begin a rate-cutting cycle in September. However, weak U.S. non-farm payroll data reinforced expectations of a rate cut, limiting the upside potential of the USD/JPY.
The latest data showed that Japan's real wages fell for the sixth consecutive month in June, raising concerns about the country's consumption-driven recovery. Meanwhile, fiscal health continues to be a concern, with opposition parties calling for increased fiscal spending and tax cuts. Under the dual pressures of politics and economics, the yen has weakened.
From a technical perspective, USD/JPY has successfully broken through the key resistance area of 147.80 (the 38.2% Fibonacci retracement level of the July rally) and has surpassed the 148.00 round-figure mark, which constitutes a short-term bullish signal. Daily indicators are bullish, and a break above the 148.50 area would strengthen the upward trend, targeting 149.00 (the 23.6% retracement level).
The lower support is at 147.75, with further support at 147.00 and 146.80 (the 4-hour 200-day moving average coincides with the 50% retracement level). Once it is lost or a technical sell-off is triggered, it may fall to 146.00 or even 145.00.
Editor's opinion:
The current USD/JPY bull/short game is primarily driven by the discrepancy between the Bank of Japan's rate hike pace and the Federal Reserve's rate cut expectations. If US inflation data falls short of expectations, it will reinforce expectations of Fed easing and put pressure on the dollar.
On the contrary, if the data is strong, it may push the exchange rate to further hit the 149 mark. In the short term, the support of 148.00 and the breakthrough of 148.50 will be the key to the conversion of bullish and bearish forces.
At its July meeting, the Bank of Japan raised its inflation forecasts and reiterated its intention to raise interest rates further if growth and inflation meet expectations. This marked a significant divergence from market expectations that the Federal Reserve would begin a rate-cutting cycle in September. However, weak U.S. non-farm payroll data reinforced expectations of a rate cut, limiting the upside potential of the USD/JPY.
The latest data showed that Japan's real wages fell for the sixth consecutive month in June, raising concerns about the country's consumption-driven recovery. Meanwhile, fiscal health continues to be a concern, with opposition parties calling for increased fiscal spending and tax cuts. Under the dual pressures of politics and economics, the yen has weakened.
From a technical perspective, USD/JPY has successfully broken through the key resistance area of 147.80 (the 38.2% Fibonacci retracement level of the July rally) and has surpassed the 148.00 round-figure mark, which constitutes a short-term bullish signal. Daily indicators are bullish, and a break above the 148.50 area would strengthen the upward trend, targeting 149.00 (the 23.6% retracement level).
The lower support is at 147.75, with further support at 147.00 and 146.80 (the 4-hour 200-day moving average coincides with the 50% retracement level). Once it is lost or a technical sell-off is triggered, it may fall to 146.00 or even 145.00.
Editor's opinion:
The current USD/JPY bull/short game is primarily driven by the discrepancy between the Bank of Japan's rate hike pace and the Federal Reserve's rate cut expectations. If US inflation data falls short of expectations, it will reinforce expectations of Fed easing and put pressure on the dollar.
On the contrary, if the data is strong, it may push the exchange rate to further hit the 149 mark. In the short term, the support of 148.00 and the breakthrough of 148.50 will be the key to the conversion of bullish and bearish forces.
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