USD/JPY Pulls Back Ahead of Monthly High with US PCE in Focus

US Dollar Outlook: USD/JPY

USD/JPY no longer carves a series of higher highs and lows as it pulls back ahead of the monthly high (151.31), and the exchange rate may track the negative slope in the 50-Day SMA (151.54) as it still holds below the moving average.

USD/JPY Pulls Back Ahead of Monthly High with US PCE in Focus

USD/JPY may struggle to retain the advance from the monthly low (146.54) as Bank of Japan Governor Kazuo Ueda reiterates that ‘if the outlook for economic activity and prices presented in the January Outlook Report is realized, the Bank will accordingly continue to raise the policy interest rate,’ and the diverging paths between the BoJ and Federal Reserve may continue to influence the exchange rate as Chairman Jerome Powell and Co. pursue a less restrictive policy.

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

In turn, swings in the carry trade may sway USD/JPY as Fed officials still forecast lower interest rates for 2025, but the exchange rate may extend the advance from the start of the week as the update to the US Personal Consumption Expenditure (PCE) Price Index is anticipated to show sticky inflation.

US Economic Calendar

The core PCE, the Fed’s preferred gauge for inflation, is expected to increase to 2.7% in February from 2.6% per annum the month prior, and signs of persistent price growth may keep USD/JPY afloat as it encourages the Federal Open Market Committee (FOMC) to retain the current policy.

However, a softer-than-expected PCE print may push the FOMC to further unwind its restrictive policy, and speculation for a looming Fed rate-cut may drag on the Greenback as the central bank projects that ‘the appropriate level of the federal funds rate will be 3.9 percent at the end of this year.’

With that said, USD/JPY may track the negative slope in the 50-Day SMA (151.54) as it pulls back ahead of the monthly high (151.31), but the exchange rate may attempt to retrace the decline from the February high (155.89) should it defend the advance from the start of the week.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

USD/JPY holds below the monthly high (151.31) as it struggles to extend the recent series of higher highs and lows, and a move below the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone may push the exchange rate back towards the monthly low (146.54).
A break/close below the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region opens up the October low (142.97), but a breach above the monthly high (151.31) may push USD/JPY towards 151.95 (2022 high).
A break/close above 153.80 (23.6% Fibonacci retracement) brings the February high (155.89) on the radar, with the next area of interest coming in around 156.50 (78.6% Fibonacci extension).

Additional Market Outlooks

British Pound Forecast: GBP/USD Coils with UK CPI on Tap

AUD/USD Halts Four-Day Selloff Ahead of Australia CPI

Canadian Dollar Forecast: USD/CAD Breakout Looms on Trump Tariffs

EUR/USD Post-Fed Weakness Pulls RSI Back from Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.