USD/JPY Update: The Yen Weakens Rapidly After the Release of US CPI

The trading week continues and, for now, over the last two sessions, USD/JPY has begun to show a renewed buying bias, accumulating gains of more than 0.7% in the short term in favor of the US dollar and highlighting consistent weakness in the Japanese yen.

At the moment, buying pressure has gained traction following the release of US inflation data earlier today, allowing markets to anticipate a potential policy dynamic from the Federal Reserve. In the absence of meaningful surprises from the Bank of Japan, the dollar appears to be benefiting from a buying bias that could remain relevant in the coming sessions.

Inflation Data Day

During today’s session, inflation data for February in the United States were released. The annual CPI (Y/Y) came in at 2.4%, exactly in line with expectations and unchanged from the previous reading.

For now, inflation appears to have shown meaningful moderation in the early months of 2026 based on recent trends. However, it is important to note that it remains slightly above the Federal Reserve’s target of 2.00%.

Source: TradingEconomics

That said, what must be considered is that the recent inflation release was accompanied by commentary suggesting that a clear deceleration in prices may not materialize in the coming months. This is largely because the recent spike in crude oil prices observed this week has not yet been reflected in today’s data, and this could eventually increase global energy costs and generate additional inflationary pressures in future readings.

In fact, despite the inflation data not showing a meaningful acceleration, the expected neutral monetary outlook for the Federal Reserve has not changed. This is partly due to ongoing expectations that inflation could reaccelerate.

According to CME Group, the rate probability table shows a 97.3% likelihood that the benchmark rate will remain at the current 3.75% level for the March 18 meeting. Additionally, there is more than a 50% probability that rates will remain unchanged through the July 29 meeting of this year. This highlights the prevailing sense of strong neutrality surrounding the Federal Reserve, even after today’s inflation data release.

Source: CMEGROUP

This development is particularly relevant because as long as expectations for stable interest rates persist, the US Treasury bond market may continue to gain attractiveness. A prolonged period of steady rates allows 10-year Treasury yields to remain appealing, and these bonds are currently considered one of the key safe-haven assets.

As a result, if this dynamic continues, consistent foreign capital inflows into the United States may strengthen dollar demand relative to the yen, potentially reinforcing buying pressure in USD/JPY in the short term.

 

The Bank of Japan Does Not Surprise

Although the Bank of Japan’s benchmark rate currently stands at 0.75%, one of the highest levels seen in decades, there has been no clear signal or confirmation that rates will continue to rise consistently in upcoming meetings, including the next one scheduled between March 18 and 19.

For now, perspectives between the central bank and the government remain divided. While the Bank of Japan views rising inflation as an increasingly relevant factor, the government is not fully aligned with the idea of further rate hikes. This has created a broadly cautious environment that could influence a neutral monetary policy stance in upcoming decisions.

With this in mind, it is important to recognize that Japan’s relatively low interest rate may be reducing the appeal of yen-denominated investments compared to assets in currencies such as the US dollar. Unless markets perceive clear and consistent signals that Japanese interest rates could rise further, it may remain difficult to establish sustained demand for the yen in the short term. This, in turn, could continue to support buying pressure in USD/JPY in the coming sessions.

 

Technical Outlook for USD/JPY

Source: StoneX, Tradingview

• Nothing Stops the Uptrend: For several months, the average price movements of USD/JPY have maintained a consistent upward trendline, which remains intact as no significant selling moves have threatened the current structure. Buying pressure has once again shown dominant strength, and if new highs begin to form, this could reflect a more pronounced extension of the prevailing uptrend in the coming sessions.
   

• RSI: The RSI remains above the neutral 50 level, suggesting that average buying momentum over the last 14 sessions has gained relevance. However, the indicator is approaching the 70 level — the overbought threshold — which may signal a potential excess of buying pressure and open the door for short-term corrective pullbacks.
   
• MACD: The MACD histogram remains above the zero line, indicating that the buying bias continues to dominate short-term moving average momentum. As long as this dynamic persists, buying pressure may remain relevant in upcoming sessions.
   

Key Levels:

• 159.004 – Key Resistance: Area corresponding to the 2026 highs and the main bullish barrier to monitor. A sustained move above this level could consolidate a dominant buying bias and enable a more aggressive extension of the current trendline.
   
• 156.301 – Near-Term Barrier: Level aligned with the 50-period moving average and a potential reference point for short-term corrective pullbacks.
   
• 153.900 – Key Support: Level corresponding to recent lows. Moves below this area could threaten the current bullish structure and open the door to a more relevant selling bias in the coming sessions.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25