- Summary:
- USDJPY declined for the second successive session despite the Federal Reserve holding interest rates steady.
The US dollar lost more ground against the Japanese yen in Thursday’s European trading session, with investors unmoved by Wednesday’s Federal Reserve interest rate decision. The USDJPY pair traded at 154.55 at the time of writing, down by 0.4% to register the second successive day of decline.
The Federal Reserve retained borrowing costs in the 4.25%-4.50% range on Wednesday, stating that a rate cut would only come if there was enough evidence to prove that inflation rate has been contained. On the other hand, analysts are betting that the Bank of Japan will raise interest rates multiple times this year, likely after spring wage negotiations.
Ultimately, the Fed’s next cut will depend on whether inflation rate will have returned to the 2% target. Personal Consumption Expenditure (PCE) figures for January will be out on Friday, and will give hints on the inflation trajectory. Analysts opine that President Donald Trump’s tariff plans will make it more difficult to contain inflation, as imports could become more expensive.
Three high-impact data sets will be out later in the day, headlined by the Q4 2024 US GDP figures. Also, last week’s Initial Jobless Claims figures and Japan’s Consumer Price Index (CPI) will inject fresh volatility into the USDJPY currency pair’s trade.
USDJPY Forecast
The momentum on USDJPY signals control by the sellers and calls for further downside. The currency pair pivots at 154.74 and the downward momentum will likely find the first support at 154.32. However, an extended control by the sellers will break below that level and potentially test 154.00.
Conversely, the momentum will shift to the upside if the pair breaks above the pivot mark. If that happens, the next destination is likely to be at 155.04. A breach of that mark will invalidate the downside narrative and potentially extend to the next barrier at 155.41.
