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The USD/JPY currency pair has been under selling pressure, dropping to a two-month low of 151.80 before stabilizing around 152.60 at the time of writing. Furthermore, the Japanese Yen has gained significant strength due to risk-off sentiment and signals from the Bank of Japan.
Japanese Yen Benefits from BoJ Tightening
According to the forex market trading. The Japanese yen gained strong positive momentum against the rest of the major currencies amid strong signals of the Bank of Japan's readiness to tighten. In this regard, a member of the Board of Directors of the Bank of Japan, Naoki Tamura, stated that the Japanese central bank should raise the interest rate to at least 1% in the latter part of the fiscal year 2025. Also, Finance Minister Katsunobu Kato warned that inflation may continue to rise.
Moreover, recent economic data has highlighted strong wage growth, providing momentum to expectations that the Bank of Japan will continue to raise interest rates this year. According to the results of the economic calendar data, real wages in Japan rose for the second consecutive month in December, with nominal wage growth reaching its highest level in nearly three decades, driven largely by higher winter bonuses.
For its part, the Bank of Japan raised interest rates in January and indicated its willingness to raise them further if economic trends and prices are in line with its expectations. Also, the yen's rise was supported by broad weakness in the US dollar, lower Treasury yields, amid mixed US economic data and easing concerns about a global trade war Tips:
The Japanese yen is one of the most prominent safe havens, and increasing uncertainty may increase its gains.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Japanese stocks are the strongest today
During Thursday's trading, and through stock trading platforms, the Nikkei 225 index of Japanese stocks rose by 0.6% to close at 39066, while the broader Topix index rose by 0.25% to 2752, marking the third consecutive day of gains for Japanese stocks. Obviously, these moves followed positive trends in US stock markets on Wall Street as concerns about a global trade war eased amid cautious measures by the US and China. Nvidia and other AI-related stocks also recovered losses associated with the DeepSeek disaster.
EURUSD Chart by TradingViewUSD/JPY Technical analysis and Expectations Today:
According to the daily chart, the USD/JPY pair is moving within a recently formed downward channel. Technically, the bears' success in moving towards the psychological level of 150.00 will reinforce the downward trend, and with it the technical indicators are moving towards strong oversold levels. We still prefer to buy USD/JPY from every downward level, but without risk, and the closest support levels currently are 151.60 and 150.90, respectively. On the other hand, and in the same time frame, moving towards and above the resistance of 156.00 will reinforce the bulls' control over the trend again.
The currency pair will remain in a cautious wait-and-see mode until the US jobs numbers are announced, which will have a reaction to the future of the US Federal Reserve's policies, in addition to the reaction to Trump's continued imposition of more tariffs.
Want to trade our USD/JPY forex analysis and predictions ? Here's a list of forex brokers in Japan to check out.
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