USD/JPY Tests 159.47 as Weak Japanese Inflation Pressures Yen

Consumer inflation slowed from 1.5% to 1.3% year-over-year, in line with expectations, while the core index declined from 2.0% to 1.6% versus forecasts of 1.7%. The figures have now fallen for four consecutive months and dropped below the 2.0% target, signaling weak demand, risks of GDP contraction, and potential deflationary pressure, weighing on the yen. The regulator noted that the trend reflects lower electricity prices and slower food inflation, while the underlying trend remains moderately positive due to rising wages and inflation expectations around 2.0%. Maintaining the interest rate at 0.75% continues to support ultra-loose financial conditions. Most policymakers agreed that decisions on monetary policy should be made at each meeting based on incoming data rather than following a predetermined pace. Despite the current situation, the Bank of Japan is not rushing toward hawkish rhetoric, awaiting confirmation of sustainable trends. The interest rate differential between Japan and the US and EU has already pushed the yen toward 159.47, and as long as policymakers remain cautious, pressure on the currency is likely to persist.

The US dollar rebounded after falling to 98.63 on the USD Index. Today at 14:30 (GMT+2), initial jobless claims data will be released. According to forecasts, claims are expected to rise to 211.0K from 205.0K previously. Signs of labor market cooling could push the US dollar above 99.20, while stronger data may lead to a test of the weekly high near 100.00.

Support and resistance levels

The long-term trend remains bullish. Price has reached resistance at 159.47, and a breakout could lead to growth toward 161.78 and 164.07. Otherwise, a correction toward support at 157.32 is expected. Long positions may become relevant near this level with a target at 159.47, while a break below 157.32 could lead to a move toward EMA (190) and 153.76.

The medium-term trend also remains bullish. Last week, the pair declined toward the 157.08–156.81 support zone but failed to test it. This week, upward momentum continues, with price approaching last week’s peak at 159.90. A breakout above this level could target the 163.22–162.64 zone. However, if a correction develops, support at 157.08–156.81 may be tested, where long positions may become relevant with targets at 158.35 and 159.90.

Resistance levels: 159.47, 161.78, 164.07.

Support levels: 157.32, 153.76, 152.55.

Trading scenarios and USD/JPY forecast

Long positions may be opened from 157.32 with a target at 159.47 and stop-loss at 156.62. Timeframe: 9–12 days.

Short positions may be opened below 156.62 with a target at 153.76 and stop-loss at 158.00.