Daily Price Outlook
During Thursday's European trading session, the USD/JPY currency pair continued its upward momentum, climbing to the 144.25 level.
However, the surge was largely driven by the dovish stance of the Bank of Japan (BoJ) and growing optimism surrounding the potential de-escalation of the US-China trade conflict.
Therefore, the combination of these factors weighed heavily on the Japanese Yen (JPY) and contributed to the gains in the USD/JPY pair.
BoJ's Dovish Outlook Dampens Expectations for Rate Hike
However, the recent BoJ meeting played a key role in the Yen's decline. The BoJ kept its interest rate at 0.5%, as expected, but its cautious outlook reduced hopes for a rate hike soon.
Governor Kazuo Ueda said Japan’s inflation wouldn't hit the 2% target in the short term, delaying any rate increase plans for June or July. This, along with a lowered inflation forecast for fiscal 2026, highlights Japan's struggle to achieve stable inflation, weakening the Yen further.
Ueda also mentioned that Japan's economic outlook is uncertain, mainly due to global trade issues, especially ongoing US tariffs. While Japan’s economy is "roughly on track," changes in US trade policy could have a big impact on Japan’s monetary decisions.
US-China Trade Optimism Adds Pressure to the JPY
Meanwhile, renewed optimism surrounding US-China trade relations also weighed on the Yen. US President Donald Trump’s remarks fueled market sentiment, suggesting the possibility of a trade deal with China, and the broader hope that the US-China trade war could de-escalate.
This positive tone surrounding risk assets undermined the JPY, traditionally a safe-haven currency in times of uncertainty, as investors favored higher-yielding assets.
Trump’s comments about trade deals with countries such as India, South Korea, and Japan, along with the "very good probability" of reaching a deal with China, further bolstered optimism in the markets.
These signals of de-escalation helped support the USD, as investors took a more risk-on approach, leaving the JPY vulnerable to further declines.
US Economic Data and Fed Rate Cut Speculation
On the other hand, the US economic data painted a mixed picture. The latest employment figures from ADP showed a sharp slowdown in private-sector job growth in April, with only 62,000 new jobs added, well below expectations.
Meanwhile, the US GDP contracted by 0.3% in Q1 2025, stoking concerns about a potential US recession. Additionally, the US Personal Consumption Expenditures (PCE) Price Index, a key inflation gauge, edged lower to 2.3% in March, adding to the belief that inflationary pressures are easing.
Despite the somewhat gloomy data, market participants remain focused on the Federal Reserve's dovish outlook.
There is growing speculation that the Fed may resume its rate-cutting cycle in June, with traders pricing in the possibility of a full 100 basis points cut by the end of the year.
Therefore, the prospect of further rate cuts by the Fed weighs on the USD, limiting its strength, but the overall positive risk sentiment and market optimism around US-China trade relations continue to support the USD/JPY pair's bullish trend.
USD/JPY – Technical Analysis
USD/JPY has broken out aggressively from consolidation and is now trading at 144.38, having breached a critical resistance at 144.03. Price surged from the ascending channel’s lower boundary, confirming the bullish structure, and is now approaching the midline of the rising parallel channel.
A bullish engulfing candle formed at the breakout point, supported by strong volume and follow-through, suggests further upside potential.
The 50-period SMA at 142.976 has begun sloping upward and now aligns with dynamic support. Price is trading firmly above both the 50 SMA and the channel’s median line, signaling trend continuation.
The RSI is currently at 72.82—technically overbought—but historically, during strong uptrends, it tends to hover above 70 for extended periods. No immediate divergence is visible, which further supports the bullish outlook.
Immediate resistance stands at 145.13, with further upside potential toward 146.15 and 147.15 if momentum continues.
On the downside, 144.03 is the key breakout level to watch; any retest that holds could offer a buying opportunity. Further support sits at 143.01, which aligns with the ascending trendline and SMA support.
While RSI suggests some caution, the overall structure—breakout above resistance, channel continuation, and SMA alignment—favors bulls.
A daily close above 145.13 could confirm further gains toward 146.15, completing the next leg of the ascending channel.
Related News
- GOLD Price Analysis – May 01, 2025
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.