Over the past 24 to 48 hours, USDJPY exhibited notable volatility, trading around yesterday’s close at 162.107. Market sentiment was shaped by multiple intersecting factors. Recent US inflation data came in lower than expected, weighing on the US dollar and sparking a dip in the dollar index, which temporarily pressured USDJPY lower. However, rising inflation and bond yields in Japan have heightened expectations of another Bank of Japan (BOJ) rate hike, providing strong support for a bullish USDJPY trend in the medium term. This shift in interest rate differentials is key in driving USDJPY closer to the psychologically important level of 175.

Against this backdrop, the US June Consumer Price Index (CPI) undershot forecasts, weakening the dollar and boosting gold prices, while the increasing risk of a BOJ rate hike has enhanced the allure of the yen. Meanwhile, investors remain alert to potential Japanese government intervention to curb further yen depreciation, signaling a warning for the forex market. For investors, this means short-term volatility in USDJPY might intensify, but medium- to long-term dynamics continue to favor the dollar amid divergent monetary policies.

In essence, if your portfolios have exposure to yen-linked assets, close attention should be paid to BOJ rate hike developments and intervention risks as these will directly impact your portfolio’s yen exposure and returns.

Daily Chart

Looking at the daily chart, USDJPY has rebounded strongly from the year’s low near 145 and has been consolidating between 160 and 162 recently. The Bollinger Bands indicate price oscillating between the middle and upper bands, signaling sustained bullish momentum. Both the 50-day and 200-day moving averages form a golden cross, confirming a longer-term uptrend, although prices have recently struggled to surpass the yearly high of 162.83, suggesting a short-term consolidation phase.

1H Chart

On the hourly chart, the last 3-5 days have seen obvious choppy price action. The MACD shows a bearish divergence, hinting at weakening short-term momentum. Multiple failed attempts to breach the recent high around 162.26 created a potential head formation, compounded by price retreating from the upper Bollinger Band. This points to a possible sideways movement or slight pullback in the near term.

Technical Trend:  Currently showing cautious sideways consolidation within an overall bullish longer-term trend, best described as cautiously consolidating.

Technically, USDJPY’s critical test lies in holding the short-term support at 161.95 and overcoming resistance near 162.80. The presence of bearish divergence on the MACD and multiple rejections at the yearly high indicate fading bullish momentum. The longer-term trend remains bullish, but short-term downside risk is emerging. A break below 160.50 would likely intensify selling pressure.

Today’s economic calendar lacks any major events directly impacting USDJPY, with no significant Japanese or U.S. data releases scheduled. Japan’s May machinery orders are expected to show a 12.4% monthly decline, potentially indicating weaker industrial spending and providing mild pressure on the yen. While several Chinese data points and upcoming U.S. producer price index (PPI) reports merit attention, their direct influence on USDJPY remains limited. Traders should stay alert to broader market sentiment shifts.

Resistance & Support

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