- We have frequently recommended buying the USD/JPY currency pair from every downward level, and at the beginning of this month, through our direct free trading recommendations page, we bought the US dollar against the Japanese yen from around the support level of 151.00.
- Afterward, the currency pair moved in the expected direction with gains extending to the resistance level of 154.80, where the dollar against the Japanese yen recorded its best daily performance in two months.
- US inflation figures were a strong and important catalyst for the bulls in recording these gains.
US stocks decline after inflation readings
In yesterday's trading session, through stock trading platforms, US stock prices declined following a report that US inflation was unexpectedly worsening. According to the trades, the S&P 500 index fell by 0.3% on Wednesday, although it was on track for a much worse loss of 1.1% at the start of trading. The Dow Jones Industrial Average fell 0.5%, while the Nasdaq Composite closed virtually unchanged. Stocks had pared losses during the day as crude oil prices fell. Treasury yields jumped, adding pressure to the financial markets after the US inflation report showed an unexpected acceleration in January. Obviously, this bolstered bets that the Federal Reserve may not cut US interest rates this year.
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We still recommend buying the dollar against the Japanese yen from every low level, but carefully monitor the influencing factors listed in the analysis to come up with the best trading opportunities.
For its part, the Federal Reserve cut US interest rates sharply from September until the end of last year, with the aim of making borrowing cheaper, helping the economy and boosting the prices of stocks, bonds and other investments. However, the Fed warned at the end of 2024 that it may not cut US interest rates by as much in 2025 due to concerns about stubbornly high inflation. Its goal is to keep inflation at 2%, and low interest rates can lead to higher inflation.
In general, some investors were betting that the Federal Reserve would not cut US interest rates at all in 2025, even before the CPI report.
USD/JPY Technical analysis and Expectations Today:
After its recent gains, the USD/JPY currency pair is trying to form an upward channel, opposite to the recent downward movement that pushed it towards the support level of 150.93, the lowest for the currency pair in two months. The bulls' success in breaking the resistance of 156.00 will strengthen the upward trend. Conversely, and according to the performance on the daily chart, the hopes of the current upward move will evaporate with a return to the vicinity of the support level of 152.30. Technically, the performance of the USD/JPY pair will remain subject to signals from global central bank officials and the extent to which investors are willing to take risks due to Trump's trade and political policies. Ultimately, the strategy of buying from every downward level remains the strongest.
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