Expectations of a Rate Hike! USD/JPY Fluctuates Above 160

Summary:

Although the United States and Iran have reached a framework agreement for peace and oil prices have subsequently fallen, this development is not expected to alter the Bank of Japan’s overall course toward monetary policy normalization.

BUY USDJPY

EXP

TRADING

160.246

Entry Price

163.000

158.000

160.338 -0.003 0.00%

0.0

Pips

Flat

158.000

Exit Price

160.246

Entry Price

163.000

Fundamentals

The dollar remains above 160 against the yen, approaching the sensitive level that previously triggered intervention by the Japanese government. The market has almost fully priced in expectations that the Bank of Japan will raise interest rates by 25 basis points to 1% this time, but investors are truly focused on whether its subsequent rate hike path will be sufficiently hawkish. Matsuzawa Naka, chief strategist at Nomura Securities, pointed out that the Bank of Japan remains behind the current inflation situation, and its policy stance may struggle to reach the level of toughness expected by the market. The Bank of Japan is also reluctant to significantly outpace the government’s stance, so as not to shoulder excessive responsibility amid economic headwinds.

In recent years, incoming Federal Reserve Chair Kevin Warsh has frequently addressed issues such as the size of the Fed’s balance sheet, the reduction of forward guidance, and the Fed’s role in climate change. However, the press conference scheduled for this Wednesday will mark his first opportunity, as Fed Chair, to deliver systematic comments with substantive policy implications regarding inflation, employment, and the economic outlook. Currently, U.S. inflation remains more than one percentage point above the Fed’s 2% target. The Trump administration’s increase in import tariffs, coupled with rising oil prices triggered by the U.S.-backed conflict with Iran, has raised the risk that what might have been viewed as temporary price shocks could evolve into more persistent inflationary pressures. Meanwhile, the U.S. labor market remains close to full employment, hiring activity is picking up again, and recent reports from several regional Fed banks indicate that wage growth pressures are building.

Technical Analysis

On the daily chart, the USD/JPY pair shows narrowing Bollinger Bands and flat moving averages, indicating a potential reversal at any moment. There is a high probability of an upward move toward the previous high at 160.8. The RSI stands at 58, suggesting that market sentiment is predominantly bullish. On the 4-hour chart, the Bollinger Bands are narrowing and the moving averages are flat, while the MACD fast and slow lines are trading above the 0 line, indicating that the bullish trend remains intact. The RSI stands at 49, indicating a wait-and-see sentiment in the market. The recommended strategy is to buy on dips.

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Expectations of a Rate Hike! USD/JPY Fluctuates Above 160_2

Trading Recommendation

Trading Direction: Buy

Entry Price: 160.1

Target Price: 163

Stop-Loss Price: 158

Support Levels: 158, 157, 155

Resistance Levels: 161, 162, 163

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Expectations of a Rate Hike! USD/JPY Fluctuates Above 160

Risk Disclosure