USD/JPY Forecast: Pair Eyes April High at 160.71 as US CPI Hits 3.8% and 10-Year Yields Reach 4.63%

The Consumer Price Index rose from 3.3% to 3.8% year-on-year, the core reading reached 2.8%, and fuel costs surged 17.9%, prompting investors to revise their expectations in a hawkish direction. According to the CME FedWatch Tool, the probability of the interest rate remaining in the 3.50–3.75% range at the June 17 meeting stands at 99.2%. Additional support for the dollar comes from 10-year Treasury yields, which have climbed to 4.63% — the highest since February of last year. The labor market shows no signs of cooling: non-farm payrolls added 115,000 jobs, unemployment held at 4.3%, and weekly jobless claims for the week ending May 9 came in at just 211,000. Elevated inflation combined with a resilient labor market traditionally boosts government bond yields and demand for the dollar, which should allow the pair to continue its advance in the near term.

Meanwhile, Bank of Japan officials are holding borrowing costs at 0.75%, though at the April meeting three board members advocated for a hike to 1.00% — reflecting growing hawkish sentiment within the central bank. Domestic inflation remains below the 2.0% target: the March CPI reached 1.5% year-on-year, the core reading excluding food stood at 1.8%, and the equivalent figure for the Tokyo metropolitan area slowed to 1.5% in April. On the other hand, investors should pay attention to producer inflation, which hit 4.9% year-on-year last month, and import prices in yen terms, which rose 17.5% — both factors that are raising expectations for monetary tightening as early as June.

Tomorrow at 01:50 (GMT+2), Japan's GDP report will be released. Preliminary estimates point to growth accelerating from 1.3% to 1.7% year-on-year and from 0.3% to 0.4% quarter-on-quarter. If the data exceeds forecasts, USD/JPY could enter a corrective pullback; otherwise, the pair is likely to continue its advance toward the April high of 160.70.

Support and Resistance Levels

The long-term trend is bullish: in late April and early May, a downward correction formed a support level at 156.00 and tested the EMA (190), from which price rebounded, broke through resistance at 157.94, and is now heading toward 160.71. Long positions should be considered from the 157.94 support level.

The medium-term trend also remains bullish: in early May, price pulled back to the trend support zone of 155.52–155.04, reversed, cleared 157.88 last week, and continued toward 160.72.

Resistance levels: 160.71, 161.78.

Support levels: 157.94, 156.00.

USD/JPY Trading Scenarios and Price Forecast

Long positions can be opened from 157.94, targeting 160.71, with a stop-loss at 157.11. Time horizon: 9–12 days.

Short positions can be opened below 157.11, targeting 155.25, with a stop-loss at 157.94.