The Bank of Japan's interest rate hike expectations have cooled down, coupled with political instability, the yen is under pressure to weaken, but technically we need to be wary of the failure to break through the key resistance of 149
2025-07-18 14:03:18
Japan's inflation data was weak and expectations of a central bank rate hike continued to cool.
Japan's national consumer price index (CPI) rose 3.3% year-on-year in June, and the core CPI also fell to 3.3% from the previous value of 3.7%, further reducing market expectations for the Bank of Japan to raise interest rates this year.
Although the CPI excluding fresh food and energy rose slightly to 3.4%, the overall inflation trend fell, providing a buffer for the Bank of Japan to continue to maintain its loose policy at its July meeting.
This makes the yen weaker overall against major currencies, especially against the backdrop of a rebound in global risk appetite, the attractiveness of the safe-haven yen has further declined.
Japan's political instability limits yen buying appetite.
The upcoming House of Councillors election on July 20 is seen as a key mid-term test for the LDP-Komeito coalition government led by Prime Minister Shigeru Ishiba.
Opinion polls showed the coalition could lose its parliamentary majority, raising concerns about a widening fiscal deficit and policy uncertainty, curbing yen buying.
The Federal Reserve is divided, but economic data supports dollar bulls.
Recently, many Fed officials have held different views on the policy path. Waller is inclined to cut interest rates in July, saying that the risks of economic downturn have increased; Kugler and Bostic support maintaining interest rates, saying that long-term inflation expectations need to continue to be curbed.
At the same time, U.S. retail sales grew 0.6% in June and initial jobless claims fell to a three-month low, reinforcing the market's judgment that the Federal Reserve will remain on hold or even postpone rate cuts. Against this backdrop, the dollar remained strong overall.
From the technical structure, USD/JPY is still in a bull channel. The upper resistance: 149.15-149.20 is the short-term key resistance area. If it breaks through effectively, it is expected to test the 150 integer mark and even challenge 151.
Support below: Short-term support is at 148.20-148.25 (100-hour moving average). If it falls below, pay attention to the 148.00 and 147.70 levels. Once it falls, the exchange rate may test the 146.60 to 146.00 area and approach the 100-day moving average support of 145.80.
Current technical indicators maintain positive momentum but have not entered the overbought area, indicating that there is still upside potential in the future, but we need to be wary of the risk of false breakthroughs.
Editor's opinion:
The current pressure on the yen stems from "triple pressure": falling inflation, monetary policy divergence and political uncertainty. Although the US dollar is volatile in the short term, the technical structure and the US-Japan interest rate differential support USD/JPY to remain strong.
If the yen continues to weaken amid Japan's political instability and declining expectations for rate hikes, USD/JPY could break through the 149 mark. However, if the weekend election results bring surprises or the Fed's dovish stance becomes more dovish, the dollar's rebound momentum may be suppressed.
Japan's national consumer price index (CPI) rose 3.3% year-on-year in June, and the core CPI also fell to 3.3% from the previous value of 3.7%, further reducing market expectations for the Bank of Japan to raise interest rates this year.
Although the CPI excluding fresh food and energy rose slightly to 3.4%, the overall inflation trend fell, providing a buffer for the Bank of Japan to continue to maintain its loose policy at its July meeting.
This makes the yen weaker overall against major currencies, especially against the backdrop of a rebound in global risk appetite, the attractiveness of the safe-haven yen has further declined.
Japan's political instability limits yen buying appetite.
The upcoming House of Councillors election on July 20 is seen as a key mid-term test for the LDP-Komeito coalition government led by Prime Minister Shigeru Ishiba.
Opinion polls showed the coalition could lose its parliamentary majority, raising concerns about a widening fiscal deficit and policy uncertainty, curbing yen buying.
The Federal Reserve is divided, but economic data supports dollar bulls.
Recently, many Fed officials have held different views on the policy path. Waller is inclined to cut interest rates in July, saying that the risks of economic downturn have increased; Kugler and Bostic support maintaining interest rates, saying that long-term inflation expectations need to continue to be curbed.
At the same time, U.S. retail sales grew 0.6% in June and initial jobless claims fell to a three-month low, reinforcing the market's judgment that the Federal Reserve will remain on hold or even postpone rate cuts. Against this backdrop, the dollar remained strong overall.
From the technical structure, USD/JPY is still in a bull channel. The upper resistance: 149.15-149.20 is the short-term key resistance area. If it breaks through effectively, it is expected to test the 150 integer mark and even challenge 151.
Support below: Short-term support is at 148.20-148.25 (100-hour moving average). If it falls below, pay attention to the 148.00 and 147.70 levels. Once it falls, the exchange rate may test the 146.60 to 146.00 area and approach the 100-day moving average support of 145.80.
Current technical indicators maintain positive momentum but have not entered the overbought area, indicating that there is still upside potential in the future, but we need to be wary of the risk of false breakthroughs.
Editor's opinion:
The current pressure on the yen stems from "triple pressure": falling inflation, monetary policy divergence and political uncertainty. Although the US dollar is volatile in the short term, the technical structure and the US-Japan interest rate differential support USD/JPY to remain strong.
If the yen continues to weaken amid Japan's political instability and declining expectations for rate hikes, USD/JPY could break through the 149 mark. However, if the weekend election results bring surprises or the Fed's dovish stance becomes more dovish, the dollar's rebound momentum may be suppressed.
- 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.
