- The USD/JPY forecast shows rising bets for another Bank of Japan rate hike.
- Japan’s GDP increased by 2.8% in the fourth quarter of 2024.
- Recent BoJ policymaker remarks have shown a more hawkish tone.
The USD/JPY forecast shows rising bets for another Bank of Japan rate hike in July after Japan released an upbeat GDP report. As a result, Japanese bond yields have rallied to new highs, boosting the yen.
Data on Monday revealed that Japan’s GDP increased by 2.8% in the fourth quarter of 2024. This figure was much higher than the forecast of 1.0%, showing stronger-than-expected economic expansion. Moreover, this report followed several others showing stronger consumption, wage growth, and inflation in the country. Consequently, the stage is set for more Bank of Japan rate hikes.
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Japan’s central bank hiked rates in January and left the door open for more hikes. Market participants were pricing at least one more hike in the fourth quarter. However, recent policymaker remarks have shown a more hawkish tone and a willingness to hike rates further. Additionally, data has pushed analysts to forecast another rate hike as early as April. Meanwhile, markets are pricing an 80% chance of a hike in July.
Meanwhile, the dollar eased at the start of a quiet week, with few major reports from the US. Market participants will focus on Trump’s speech on Tuesday, which might give more clues on tariffs. The delay in reciprocal tariffs weighed on the greenback last week.
USD/JPY key events today
Market participants are not expecting key reports from Japan or the US.
USD/JPY technical forecast: Bears attacking 151.02 support
On the technical side, the USD/JPY price has collapsed after failing to break above its resistance trendline. It currently trades below the 30-SMA with the RSI near the oversold region, suggesting a bearish bias. However, bears are approaching a solid hurdle at the 151.02 support level that might pause the decline.
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USD/JPY has maintained a downtrend, making lower highs and lows with a clear resistance trendline. However, the trend has been shallow, with the price chopping through the 30-SMA. If this trend continues, the price will soon break below the 151.02 support level to make a lower low.
On the other hand, the price might pause at 151.02 and reverse to retest the resistance trendline. A break above the trendline would confirm a bullish reversal.
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