USDJPY strengthens despite expectations of BoJ policy tightening

31.01.2025

Although the USDJPY rate is undergoing a correction, the selling pressure remains. The price currently stands at 154.69. More details in our analysis for 31 January 2025.

USDJPY forecast: key trading points

  • Bank of Japan Deputy Governor Ryozo Himino said further rate hikes are possible
  • Tokyo core inflation accelerated to 2.5% in January
  • US initial jobless claims decreased to 207 thousand
  • US economy grew by 2.3% year-on-year in Q4 2024
  • USDJPY forecast for 31 January 2025: 153.75 and 152.35

Fundamental analysis

The USDJPY rate is rising on Friday after rebounding from the 153.85 support level. Sellers’s attempts to strengthen the yen remain restrained despite growing expectations of a Bank of Japan interest rate hike. On Thursday, Bank of Japan Deputy Governor Ryozo Himino reiterated that the BoJ is ready to continue tightening monetary policy if economic indicators and inflation align with forecasts.

Tokyo core inflation data confirmed the BoJ’s hawkish stance, with the rate accelerating to 2.5% in January, reaching an 11-month high. The Japanese economy received additional support from strong retail sales, recovering industrial production, and an unexpected decline in the unemployment rate.

At the same time, the US economy is sending mixed signals. Although initial jobless claims decreased by 16 thousand to 207 thousand, indicating a stable US labour market, economic growth rates in Q4 were lower than expected. The country’s GDP grew by 2.3% year-on-year, below the projected 2.6%.

US inflation continues to accelerate. The PCE price index, a key inflation gauge monitored by the Federal Reserve, rose by 2.3% from 1.5% in Q3. The core PCE price index, excluding volatile components such as energy and food prices, increased by 2.5% in Q4, aligning with analysts' forecasts.

USDJPY technical analysis

The USDJPY technical analysis indicates a downtrend. After crossing the EMA-65 and the EMA-285, the price continued to rebound from these lines, reaching new lows, which indicates the pressure from the sellers. Today’s USDJPY forecast suggests an attempt to develop a bullish correction towards the upper boundary of the descending channel at 155.30, followed by a decline to 152.35. A breakout below the lower boundary of a Triangle pattern will confirm the bearish momentum, with the price securing below 153.75.

The analysis of the Stochastic Oscillator also suggests a potential correction since the Oscillator readings exited the oversold area, and the %K and %D lines intersected upwards, signalling a price rise. However, given the current downtrend in USDJPY, this correction will unlikely be long-lived. Once the Stochastic Oscillator readings reach the resistance line, the price could reverse and fall.

An alternative bullish scenario suggests a breakout above the upper boundary of the descending channel, with the price consolidating above 155.45. This indicates a breakout above the upper boundary of the Triangle pattern and a potential upward movement to 156.85.

USDJPY technical analysis
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

Summary

Despite expectations of monetary policy tightening by the Bank of Japan, the yen remains under pressure as the market doubts the regulator’s decisiveness. At the same time, robust US economic indicators and PCE inflation growth support the US dollar. The USDJPY technical analysis confirms a downtrend and a potential short-term bullish correction before a downward movement. If the bearish momentum continues and the price consolidates below 153.75, the main downside target will be 153.75. An alternative scenario suggests a breakout above the resistance level, with the price securing above the 155.45 level, potentially advancing to 156.85.

Attention!

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.