The Japanese Yen has attracted buyers as it approaches its highest level since October against a weaker US Dollar. Recent data reveals that Japan’s base pay reached a 32-year high of 3.1% growth in January, although real cash earnings decreased by 1.8% due to inflation.
Expectations for interest rate hikes from the Bank of Japan are bolstered by rising Japanese government bond yields. In contrast, the US Dollar remains near a multi-month low amid lower job additions and increased unemployment rates in February, prompting speculation of multiple rate cuts by the Federal Reserve this year.
Usdjpy Bearish Outlook
USD/JPY bears anticipate a decline below the 147.00 mark, potentially extending a downtrend. Support levels lie at 146.50 and 146.00, with further declines towards the 145.00 mark possible.
Conversely, resistance may arise near the 148.00 level, with upward movements facing caps. A breakout above 148.70 could lead to a rally towards 150.00, while the labor cash earnings indicator indicates a potential inflationary pressure.
The Yen’s strength is drawing in buyers, nearing levels last seen in October, while the US Dollar lags behind. With base pay in Japan climbing by 3.1%—its fastest pace in over three decades—it suggests upward wage pressure. However, this isn’t translating to stronger personal finances yet, as inflation is still outpacing earnings, causing a 1.8% decline in real cash income.
Government bond yields in Japan are ticking higher, reinforcing expectations that policymakers might finally move forward with lifting interest rates. This comes at a time when weaker economic data in the United States is keeping the Dollar under strain. Job growth slowed in February, and unemployment figures crept up, fuelling further discussions around the possibility of lower interest rates across the Pacific. With the Federal Reserve now facing persistent market chatter about multiple rate cuts, traders adjusting to this dynamic should prepare for larger fluctuations in U.S. Dollar pairs.
Key Resistance And Support Levels
For those positioned in USD/JPY, bears are keeping a close eye on a possible break beneath 147.00, which could accelerate declines towards 146.50 and even 146.00. If downward pressure persists, movements as deep as 145.00 would come into focus. Meanwhile, should buyers re-emerge with force, resistance is expected around 148.00. Any attempt to push higher must break through 148.70 to open the door to a surge towards 150.00.
Labour-related data in Japan remains a key metric to follow, as wage increases could sustain inflation trends and justify renewed monetary tightening. Holding onto a broader perspective, the Yen’s momentum combined with the Dollar’s fragility suggests a window of opportunity for those navigating rate expectations on both sides.
