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The USD/JPY pair faces mixed pressures as investors weigh the Bank of Japan’s bond market actions and the Federal Reserve’s shifting rate expectations. The decline in 10-year Japanese Government Bond (JGB) yields suggests stronger demand for bonds, which could limit gains in the yen. However, the yen supports expectations of further BoJ rate hikes. Hotter-than-expected inflation in Japan strengthens the case for monetary tightening, which could reduce the policy gap between the BoJ and the Fed. If the BoJ signals more rate hikes, the yen may gain further against the dollar, putting downward pressure on the USD/JPY.
On the other hand, the US dollar has rebounded after a steep drop, but weaker economic data raises concerns about slowing growth. The sharp decline in US PMI data fuels expectations of Fed rate cuts, increasing the likelihood of a June policy shift. If the Fed turns dovish while the BoJ continues tightening, USD/JPY may face more downside pressure. However, if risk sentiment worsens, the dollar could find safe-haven demand, limiting yen gains.
The USD/JPY remains in a strong downward trend as the US dollar weakens and the Japanese yen strengthens.
The pair has reached the support region at $149.20, aligned with the descending channel’s support.
However, the trend remains bearish, and any rebound in USD/JPY may lead to another decline in the pair.
