USD/JPY Surges to One-Week High as Tokyo Inflation Cools, BoJ Tightening Bets Fade

Traders' Opinions

Summary:

The USD/JPY pair extended its rally for a third consecutive session on Friday, climbing to 155.35—its highest level in over a week.

BUY USDJPY

EXP

TRADING

155.402

Entry Price

160.000

152.000

155.057 +0.071 +0.05%

0.0

Pips

Flat

152.000

Exit Price

155.402

Entry Price

160.000

The Japanese Yen is enduring its toughest week in months, with USD/JPY bulls seizing control of the wheel to drive the pair to a fresh one-and-a-half week peak near the 155.35 region during Friday’s Asian trading session. This marks the third consecutive day of upward momentum for the major currency pair, fueled by a potent cocktail of domestic disinflationary signals and sustained US Dollar strength.

Early morning data out of Tokyo revealed that Japan’s core inflation gauge slowed to its most tepid pace in two years. This deceleration in price pressures has significantly muddied the waters for the Bank of Japan, effectively tempering market speculation that the central bank would be forced into an immediate or aggressive policy tightening. For a nation long accustomed to deflation, this stickiness in easing inflation suggests that Governor Kazuo Ueda’s camp has the luxury—or the burden—of patience, removing an urgent catalyst for Yen bulls.

Adding to the Yen’s woes are persistent macro-level anxieties regarding Japan’s fiscal health. While often a background concern, these fears have resurfaced as a tangible headwind for the domestic currency, prompting traders to demand a higher risk premium for holding JPY.

However, the bid tone in USD/JPY is not solely a Yen story; it is equally a Greenback story. The US Dollar Index continues to hover near its highest valuation since January 23, refusing to cede ground despite shifting global narratives. The Dollar’s resilience is anchored in a recalibration of Federal Reserve expectations. Markets have been aggressively paring back bets for deep and rapid rate cuts, with the consensus now leaning toward the likelihood that the Fed will maintain its restrictive posture for longer than previously anticipated.

This dynamic creates a compelling divergence. On one side, the BoJ appears constrained by cooling inflation; on the other, the Fed remains anchored by sticky US economic resilience.

Technical Analysis

From a technical perspective, USD/JPY remains positioned within a well-established bullish trend on the daily chart, underpinned by a rising trendline that has guided price action since mid-2025. The broader structure continues to favor higher highs and higher lows, reinforcing the dominant upside bias despite recent volatility.

Price recently corrected from the 158.50–159.00 resistance zone, triggering a pullback that found solid demand around the 152.00–153.00 support area, which aligns closely with both horizontal support and the ascending trendline. The strong reaction from this zone suggests that dip-buying interest remains intact and that the correction has so far been corrective rather than trend-reversing.

Currently, USD/JPY is attempting to reclaim the 155.00–155.50 region, a key former consolidation area that now acts as near-term resistance. Sustained acceptance above this level would confirm a bullish continuation and open the door for a renewed push toward the 158.00 handle, followed by a potential extension toward the 160.00–162.00 zone, which represents the next major upside objective highlighted on the chart.

On the downside, failure to hold above 154.00 would likely signal another consolidation phase, with downside risks extending toward 152.00. A decisive daily close below both this level and the rising trendline would mark a structural breakdown, shifting focus toward 150.00 and potentially 148.50, and would suggest a deeper trend correction is unfolding.

Momentum conditions point to consolidation rather than exhaustion. The broader trend remains constructive, but recent sharp swings imply the market may require additional basing before the next impulsive move higher.

TRADE RECOMMENDATION

BUY USD/JPY

ENTRY PRICE: 155.40

STOP LOSS: 152.00

TAKE PROFIT: 160.00

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USD/JPY Surges to One-Week High as Tokyo Inflation Cools, BoJ Tightening Bets Fade

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