The Japanese Yen (JPY) continued its strong ascent on Thursday, driving the USD/JPY pair to its lowest levels since December 9, hovering in the mid-150.00s during the Asian session. Growing expectations of further interest rate hikes by the Bank of Japan (BoJ) have placed upward pressure on Japanese government bond (JGB) yields, reaching their highest levels in over a decade. The narrowing interest rate differential between Japan and other global economies has played a crucial role in driving capital inflows into the JPY, benefiting its value.
Additionally, market sentiment remains cautious as US President Donald Trump’s recent tariff threats have weighed on investor appetite for riskier assets, providing further support to the Yen as a safe-haven currency. The US Dollar (USD), despite the hawkish tone from the Federal Open Market Committee (FOMC) meeting minutes released on Wednesday, continues to struggle in attracting buyers, contributing to the ongoing decline in USD/JPY.
The pair has now broken below the 151.00 level, signaling a potential further downturn. Technically, a sustained decline beneath this level would act as a trigger for bearish momentum, with oscillators on the daily chart remaining in negative territory but not yet in the oversold zone. This suggests that the path of least resistance is to the downside, with the next support levels appearing at the psychological 150.00 mark and further below at the 149.60-149.55 region. A deeper move could see the pair target the 149.00 level and approach the December 2024 low near 148.65.
On the flip side, the 150.90-151.00 range is expected to serve as immediate resistance. If the USD/JPY pair manages to rebound and reclaim these levels, short-covering could push the pair to the 151.40 region. However, any subsequent rally could encounter significant resistance around the 152.00 level, with the 200-day Simple Moving Average (SMA) at 152.65 acting as a key point for short-term traders. This area could mark a critical pivot, potentially limiting any upward movement and increasing the likelihood of renewed downward pressure.
In summary, USD/JPY is facing strong headwinds, with the JPY benefiting from both domestic interest rate expectations and broader risk-off sentiment in the global markets. Unless the pair can reclaim key resistance levels, further downside towards the 150.00 and 149.00 zones remains a distinct possibility.
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