USD/JPY, FTSE 100 Forecast: Two trades to watch

USD/JPY jumps as Japanese PM Takaichi adopts a stricter stance against BoJ rate hikes

USD/JPY has risen sharply amid a weaker yen. The yen is extending its decline after reports that Japanese Prime Minister Takaichi has taken a harder line on further rate hikes during a meeting with Bank of Japan Governor Ueda.

Following the news, the Japanese currency dropped as much as 1.1% against the dollar, underperforming its G10 peers.

Since winning a stronger mandate in the elections, Takaichi has been expected to shift towards more market-friendly policies; however, these latest reports suggest an increasing risk that she could suppress BoJ rate hikes.

Takaichi has become known for her pro-stimulus stance, favouring economic growth over rising interest rates, although she has slightly eased her stance to soothe market nerves after Japanese bond yields surged to historic levels.

Her comments come after data last week showed that Japanese core inflation cooled to 1.5%, the first time it had fallen below 2% since March 2022. The data raised doubts over the BoJ's ability to hike rates. Tokyo inflation data is due late on Thursday and is also expected to cool below the 2% target.

Meanwhile, the US dollar is edging higher against its major peers, recovering most of yesterday's losses. The dollar's initial weakness was driven by fiscal concerns following Trump's announcement of 10% global trade tariffs and his threats to raise them to 15%, though that hasn't happened yet.

There is still uncertainty for many countries about whether the terms of their originally negotiated trade deals remain valid or whether they now need to stick to the new emergency tariffs.

Looking ahead, U.S. consumer confidence data is due later today, along with several Fed speakers, providing further clues on the Fed's interest rates. The FOMC minutes last week were more hawkish than expected.

USD/JPY forecast technical analysis

USD/JPY trades within a symmetrical triangle pattern. The price recently recovered from the 152.20, rising trendline support and is testing the 50 SMA and falling trendline resistance at 156.00.

Buyers will look to rise above this level to break out of the triangle and head towards 157.70, the February high. A rise above here creates a higher high and brings 160.0 the 2026 high into focus.

On the downside, support is seen at 154.50, the mid-December low. A break below the rising trendline support at 152.80 breaks out the downside of the triangle pattern, bringing 152.20 into focus.

FTSE hovers around record highs with trade tariffs in focus

The FTSE 100 is modestly lower on Wednesday as Trump’s new 10% global tariff regime came into effect, raising trade tensions and concerns over global growth.

However, it's worth noting that the UK government said it doesn’t expect Trump’s new tariffs to impact the US-UK trade deal agreed last year.

Financial and healthcare stocks are weighing on the index with banks under pressure amid concerns that tariffs could curb economic activity.

Losses in those sectors were partly offset by a rising commodity-linked stocks amid higher crude oil and metal prices, which supported oil majors and miners.

The FTSE has been holding up better than some of its major peers, notably outperforming the US Nasdaq amid a lack of technology stocks on the UK index. While the lack of tech stocks had held the FTSE back in previous years, this has reversed more recently, and the absence of tech stocks is proving an advantage as worries over AI disruptions continue to affect specific areas of tech.

FTSE forecast – technical analysis

The FTSE 100 has extended its run-up from the April low to a record high of 10,730. The price has eased back slightly, pulling the RSI away from overbought territory. The bullish trend remains firmly intact.

Buyers will look to extend gains above 10,730 to 10,800 and 11,000 as the next logical levels.

Support is seen at 10,450, the rising trendline support and 20 SMA. A break below here and 10,100, the February low brings 10,000, the psychological level, into focus. It would take a move below 9910 to negate the longer-term uptrend.