- Summary:
- The USDJPY pair rose by more than one percent in the last five trading sessions, but there's strong evidence to expect a decline.
USDJPY inched up on Monday, gaining 0.1% to trade at 148.85 during the Asian session. The currency pair rose by 1% in the last five trading sessions supported by a resurgence in US Treasury bond yields. However, the Japanese yen is likely to hold off aggressive gains by the greenback.
Despite recent gains by the dollar against the yen, the trend is likely to flip in the coming weeks if the Bank of Japan (BoJ) proceeds to raise interest rates in April. Japan’s labour unions negotiated an average raise in wages and salaries by about 5.1%.
Meanwhile, the absence of high-impact Japanese economic data raises the prospect of the dollar maintaining its gains on Monday. Also, US Retail Sales data will be out, and is expected to inject fresh volatility into the USDJPY pair.
However, the US economy has been flashing red, underlined by President Donald Trump comments that it is likely in a transition. That does not augur well for the dollar and will likely see the Federal Reserve lower interest rates multiple times this year.
Furthermore, this view is supported by the widening fears over the impact of trade tariffs on the economy. Attention has shifted to the US-EU trade relations which have been souring since last week amid harsh tariff and counter-tariff measures. This sets up the USDJPY pair for increased downward pressure.
USDJPY Prediction
USDJPY pivot mark is at 148.57 and action above that level signals control by the buyers. The pair will likely encounter the first resistance at 149.04. However, the action could break above that level and potentially test the second barrier at 149.50.
Alternatively, moving below 148.57 will shift the momentum to the downside. With the sellers in control, the pair will likely move lower to find the first support at 148.15. Breaking below that level will invalidate the upside thesis. Such momentum could extend the downside to test the second support at 147.80.
