USD/JPY forecast: Currency Pair of the Week | February 23, 2026

It has been another choppy start for the dollar this week, with the greenback falling initially before bouncing off its earlier lows to turn flat at the time of writing, with commodity dollars underperforming. Markets are still trying to get their heads around what ongoing trade policy uncertainty really means for the US economy, and by extension, the dollar. The threat of a US military strike on Iran hasn’t gone away either, and that is partially helping to limit the dollar’s downside risks. Still, traders are far from wading too enthusiastically into risk, which makes the USD/JPY forecast a bit cautious to start things off this week.

 

USD/JPY forecast: Trade uncertainty is the dominant theme

 

As mentioned, the dollar opened the week on the back foot. Part of that may be down to the fact that Washington held fire over the weekend and did not proceed with a strike on Iran. But more broadly, it’s trade policy that’s muddying the waters. However, the fact that the USD/JPY and other pairs bounced back from their earlier lows suggests investors are not in a war with the dollar. After all, recent data has been mixed, and the Fed’s expected rate cuts have been pushed back.

 

However, the big uncertainty now is what will happen with those tariffs and what this will mean for net export revenue and the nation’s growing deficit. The blanket 15% global tariffs announced by Trump at the weekend could mean lower tariffs for countries such as China, while the likes of the UK could lose the relative benefit of their earlier 10% negotiated arrangements. Unsurprisingly, several countries are now reassessing their trade agreements with the US. In some ways, we are back to square one and this uncertainty is never a good thing, as it will impact plans by businesses.

 

The yen could find haven flows after cryptos and US equities futures fell across the board overnight as investors reconsider the longer-term implications of sustained tariffs and the lack of any meaningful prospect of rebates for US businesses. Should we see further weakness in risk appetite, this could keep the USD/JPY forecast under a bit of pressure.

 

What other factors could influence USD/JPY forecast?

 

Last week, FOMC minutes revealed that several Fed policymakers suggested the central bank may need to raise interest rates if inflation stays above their goal, and several participants would prefer a two-sided description of the future rate intentions to reflect that it could actually hike if inflation remained at above-target levels. This puts inflation indicators in sharp focus again -- and we have PPI coming up on Friday.  Last Friday’s stronger than expected core PCE index has raised risks to the inflation outlook, which is partly why the dollar is refusing to sell off aggressively yet. But we also had a softer-than-expected Q4 GDP print which has already added to that unease.

 

There’s also political and corporate event risk to navigate, including President Trump’s State of the Union address tomorrow evening and Nvidia’s Q4 earnings midweek.

 

For today, attention turns to Fed Governor Christopher Waller speech, who had backed a 25bp cut in January. Waller has warned against further labour market deterioration, and if he sticks to that dovish tone, the dollar may struggle to find further support.

 

From Japan, we will have Tokyo Core CPI on Thursday, which is expected to print +1.7% year-over-year vs. 2.0% recorded in the previous month. Anything hotter could add downside pressure on the USD/JPY forecast.

 

USD/JPY key levels to watch

 

The USD/JPY has been printing a series of lower highs since price peaked in mid-January. We’ve seen a couple of sharp sell-offs followed by decent buying pressure, but each rebound has eventually given way to renewed selling, resulting in lower highs.

 

 

That said, key support levels on the USD/JPY chart have held so far, including the 152.00 handle, which remains crucial. In the near term, support comes in at 154.00, a level that was tested overnight and held. If USD/JPY resumes its decline and breaks below 154.00, then 153.00 will be the initial focus, followed by the 152.70 area. Last month’s low stands at 152.09. This level is pivotal — a break below it would mark a significant lower low and could pave the way for a deeper move toward the 150 area.

 

On the upside, resistance is seen around 155.00, which was being tested at the time of writing. This level aligns with Friday’s closing price and marks where the prior recovery attempt stalled last week. A move above 155.00 would bring 155.80 into focus next, where a bearish trend line connecting previous highs also comes into play.

 

All told, the USD/JPY forecast remains slightly tilted to the downside. For that reason, we continue to favour further weakness rather than a sustained upside move in the pair.

 

Video: USD/JPY and gold key levels to watch

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R