USD/JPY Price Forecast: Bulls defend 157.00 as upside-pressure builds

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart reveals the formation of a bullish engulfing chart pattern which implies that buyers outweigh sellers at around current price levels. Nevertheless, risks of intervention by Japanese authorities could cap the pair’s advance near the 158.00 figure.

Momentum remains bullish. The Relative Strength Index (RSI) is above its neutral line aiming upwards, with enough room to spare before turning overbought.

For a bullish resumption, the USD/JPY must clear the March 3 high at 157.97. A breach of the latter will expose the 158.50 mark, ahead of 159.00. Further gains lie overhead above the January 23 high at 159.22, followed by the 160.00 mark.

USD/JPY Price Chart – Daily

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.