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The Japanese yen remains under pressure as shifting economic signals and trade developments shape market sentiment. This analysis breaks down the key drivers behind the USD/JPY movement, technical trends, and what traders should keep an eye on next.
Japanese yen weakens further as USD/JPY extends rally
The Japanese yen continued to depreciate against the US dollar on Friday, with the USD/JPY pair closing at 147.311 after peaking at 147.496.
This marked the second consecutive day of gains, with the pair rebounding from a session low of 145.856.
Traders responded to the implications of a revised US-Japan trade agreement and newly released inflation figures from Tokyo.
The updated trade deal reduced tariffs on Japanese exports to 15%, down from the previously proposed 25% under the Trump administration.
While this eased some pressure on Japanese exporters, it also underscored lingering trade uncertainties – posing a challenge for the Bank of Japan (BOJ) as it navigates policy decisions.
From a macroeconomic perspective, Tokyo’s core inflation data for July came in slightly below forecasts, though it remained above the BOJ’s 2% target.
This sustained inflation level is fuelling speculation around a possible interest rate hike later in the year, despite expectations that the central bank will leave rates unchanged at its upcoming policy meeting.
Technical analysis
On the 15-minute USD/JPY chart, a clear bullish trend is evident. The pair opened the session at 146.982 and closed higher at 147.311, breaking through several resistance levels along the way.
The MACD (12,26,9) is positioned above the zero line, showing a fresh bullish crossover. In addition, short- to mid-term moving averages (5, 10, and 30) are aligned beneath the price, reinforcing the current upward momentum. The pair is currently trending with a 0.22% gain.
Picture: USDJPY firms above 147.30 as dollar momentum holds, as seen on the VT Markets app.
Earlier this week, BOJ Deputy Governor Shinichi Uchida maintained a cautious outlook, suggesting the central bank is unlikely to tighten policy prematurely given ongoing volatility in global trade.
However, speculation continues to grow that the BOJ may adjust its inflation forecast higher in its forthcoming quarterly economic report – particularly if rising energy and import costs persist, driven by yen weakness.
Cautious forecast
A sustained breakout above the 147.50 resistance level could reinforce bullish momentum, paving the way for a move toward the next key technical zone around 148.20.
This level may serve as a psychological barrier, and a decisive close above it could open the door to further upside in the near term.
However, with the upcoming Bank of Japan policy meeting and evolving inflation dynamics both in Japan and globally, heightened market volatility is expected.
Traders should remain cautious, as any surprise in the BOJ’s tone – particularly a shift toward more hawkish language – could quickly reverse sentiment.
A stronger-than-expected stance on inflation or forward guidance could prompt a corrective pullback, with 146.80 acting as the immediate support area.
Additionally, broader market drivers such as US economic data, Treasury yields, and geopolitical headlines could amplify intraday price swings.
As a result, maintaining a flexible trading strategy and closely monitoring central bank communication will be crucial in the days ahead.
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