USD/JPY Forecast: Pair Approaches 160.71 as Strong U.S. Data Supports Dollar

According to the median forecast of analysts, the Bank of Japan is likely to raise borrowing costs from 0.75% to 1.00% in June and to 1.25% by the end of the year. Pressure on the regulator comes from the growth of the May producer price index from 5.3% to 6.3% year-on-year against the forecast of 5.6%, while import prices in yen increased by 25.5% due to the weak national currency and the energy shock. On the other hand, gross domestic product (GDP) for the first quarter was revised from 2.1% to 1.8%, although experts had expected 2.1%; the share of capital expenditure in GDP fell from 1.2% to –0.7%, and May core inflation is likely to remain near 1.6% year-on-year, below the regulator’s 2.0% target. Industrial production for April, published today in monthly terms, also failed to show strong results, coming in at 0.5% month-on-month, while specialists had expected 0.8%.

Within the long-term uptrend, the trading instrument is approaching the April high of 160.71. After a breakout above this level, the price is expected to reach the resistance level of 161.78 in the short term and 164.07 in the long term. Otherwise, short positions with targets at 157.94 and 156.00, respectively, will become relevant. The price is above EMA (21) and EMA (190), indicating short-term and long-term uptrends, while the RSI indicator is in the neutral area, approaching the overbought zone.

The medium-term trend is upward: after quotes corrected to the key trend support area of 155.52–155.04 in early May, they rose last week to 157.88 and then to 160.72. After consolidation above this level, the asset may continue its positive dynamics toward zone 4 at 163.22–162.64.

Support and resistance levels

Resistance levels: 160.71, 161.78, 164.07.

Support levels: 157.94, 156.00.

USD/JPY trading scenarios and forecast

Long positions may be opened from the 157.94 level, with a target at 160.71 and a stop-loss at 157.11. Expected timeframe: 9–12 days.

Short positions may be opened below 157.11, with a target at 155.25 and a stop-loss at 157.94.