USDJPY:
The pair holds above 152.50 on steady dollar demand ahead of the U.S. inflation release. Elevated energy prices worsen Japan’s terms of trade and encourage capital outflows into higher-yielding assets, supporting the dollar against the yen. Expectations of fiscal support in Tokyo keep domestic financial conditions easy, limiting the yen’s ability to strengthen.
Domestic inflation in Japan remains above target, which in principle brings the Bank of Japan closer to discussing further normalization. However, without clear acceleration in growth and wages, the central bank is moving gradually and avoiding abrupt steps. This balance preserves a premium in favor of the dollar until U.S. data and the Fed’s stance become clearer.
In the short run, the news mix favors a moderate rise in USD/JPY: U.S. rate expectations remain the key driver, while external factors (energy, geopolitics) maintain demand for the dollar as a reserve asset. Risks to this view include unexpectedly weak U.S. inflation or an earlier-than-assumed signal of tighter policy from the Bank of Japan.
Trading recommendation: BUY 152.85, SL 152.25, TP 153.80
Origin: FreshForex
