Key Events
- Japan’s cooling inflation readings and easing rate hike expectations sustain USDJPY gains despite US tariff uncertainty
- Both the BOJ and the Fed are expected to hold rates in the short term, maintaining the dominant tilt in favor of the US Dollar
- USDJPY price action holding above the 155 mark supports a continued bullish hold outlook for the US dollar
Headline inflation in Japan has cooled below 2%, with national core CPI y/y easing to 2%, a one-year low as demonstrated in the chart below. This has pushed BOJ rate hike expectations further out, aligning BOJ policy with a short-term hold outlook similar to that of the Fed.
Japan National Core CPI Y/Y
Source: Forex factory
Regarding tariff concerns, the Supreme Court’s rejection was followed by a counter-response from Trump, reimposing them under his legal authority. This has kept global risk sentiment capped, with capital rotating toward EM, Asian, and European markets. In terms of the dollar, it remains on a sustained bullish hold given extended expectations for a later rather than sooner rate cut, as demonstrated in the CME probabilities table below.
Source: CME
As the timing of the next rate cut remains unclear, the dollar’s bullish hold is expected to persist unless tariff turbulence exceeds what has already been priced in since 2025 under the 10% blanket measures.
Looking at USDJPY price action across the 4-hour and daily time frames, a very similar pattern and analysis emerges.
USDJPY Outlook: 3-Day Time Frame – Log Scale
Source: Trading view
Looking at USDJPY price action, we can see a dominant bullish trend from the April 2025 lows, capped by the 2025 highs near 158.80. Recently, the pair rejected the 152 support, reasserting bullish bias as it continues to hold above the mid-zone of the ascending channel formed from the April lows.
Key resistance levels remain in focus between 157.30 and 158.80. These levels act as defining barriers between a return toward the 160 zone, potentially prompting intervention risks, or another pullback that could reassert the dollar’s fragile positioning.
A move back below 154.80 exposes the 152–151.80 zone for either another rebound or an extended drop toward the lower bounds of the channel near 150.80 and 149.60. This area remains the determining zone for whether the bullish continuation from April 2025 holds or fails.
USDJPY Outlook: 3-Day Time Frame – Log Scale
Source: Tradingview
A similar structure appears on the 4-hour time frame. The ascending channel here extends from the 152.30 February 2026 low, with the mid-channel zone aligning near 155. The upper boundary stands near 156.70 before a potential breakout toward 157.20 and 158.80.
On the bearish side, a break below the channel bounds at 154.80 and 154 exposes short-term downside pressures toward the yearly lows.
Long-term key trends remain in focus amid shifting narratives.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
