USD/JPY Price Forecast: Trades with positive bias below 159.00; bullish potential intact

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The USD/JPY pair trades with a positive bias for the second straight day on Wednesday, though it lacks bullish conviction and remains below the 159.00 mark through the Asian session.

USD/JPY edges higher as economic concerns counter hawkish BoJ minutes and undermine the JPY.
Geopolitical tensions continue to act as a tailwind for the USD and further support spot prices.
The technical setup favors bullish traders and backs the case for a further near-term appreciation.

The USD/JPY pair trades with a positive bias for the second straight day on Wednesday, though it lacks bullish conviction and remains below the 159.00 mark through the Asian session.

Minutes from the Bank of Japan's (BoJ) January meeting showed that policymakers saw the need to keep raising interest rates. The Japanese Yen (JPY), however, struggles to attract any meaningful buyers and remains depressed amid concerns that the war-driven surge in energy prices could weaken Japan's economic growth. Furthermore, geopolitical uncertainties continue to benefit the US Dollar's (USD) reserve currency status and act as a tailwind for the USD/JPY pair.

From a technical perspective, the near-term bias is neutral with a slight bullish tilt as spot prices hold comfortably above the 100-period Exponential Moving Average (EMA) on the 4-hour chart. This keeps the broader uptrend structure intact despite recent hesitation below the 159.80 region. The Moving Average Convergence Divergence (MACD) indicator hovers close to the zero line with its line marginally above the signal line, hinting at modest but fragile upside momentum.

Meanwhile, the Relative Strength Index (RSI) around 50 reinforces a range-bound tone, suggesting balanced forces after last week’s swing lower from the 159.80 area. Hence, any subsequent move up might confront immediate resistance near 159.30, followed by 159.80, the recent cap that guards a potential extension toward the 160.50 zone. A sustained break above 159.80 would reassert bullish control within the medium-term uptrend.

On the downside, initial support emerges at the 158.30 area where the 100-period EMA on the 4-hour chart adds technical weight, with a deeper floor at 157.90 if sellers extend control. A drop below the latter would shift focus toward a corrective phase and expose last week's swing low near mid-157.00s.

(The technical analysis of this story was written with the help of an AI tool.)

USD/JPY 4-hour chart

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.