USD/JPY Tests 159 as Inflation Data and BOJ Outlook Drive Volatility

At 15:45 (GMT+2), US investors will focus on the business activity indices report. If the manufacturing PMI continues its upward trend from the current 51.6 points, and the services index remains above 51.7 points, this will not only provide short-term support for the US currency but also strengthen the Federal Reserve’s case for maintaining a wait-and-see stance on interest rate adjustments after rates were left unchanged in the 3.50–3.75% range at the March 18 meeting. At the same time, the Fed expects GDP growth of 2.4% this year, which is 0.1% above the previous December forecast, while preliminary projections for 2027 have been revised up from 2.0% to 2.3%, and for 2028 from 1.9% to 2.1%.

In turn, tomorrow at 01:50 (GMT+2), the Bank of Japan will publish the minutes of its Monetary Policy Committee meeting, which may clarify the authorities’ plans regarding future policy adjustments. It should be recalled that on March 19 the central bank kept borrowing costs unchanged at 0.75%, in line with the expectations of the overwhelming majority of analysts. However, the decision was not unanimous: board member Hajime Takata once again called for an immediate increase to 1.00%, arguing that consumer prices have returned to the target level and that there are risks of faster inflation against the backdrop of the US-Iran confrontation. At the same time, BOJ Governor Kazuo Ueda maintained a hawkish tone, confirming in a subsequent statement that monetary tightening would continue if forecasts for economic activity and inflation materialize, even if the slowdown caused by higher energy prices due to a closure of the Strait of Hormuz proves temporary and has no significant impact on macroeconomic indicators. Despite weak exports and broader global factors, GDP continues to show positive dynamics, which has supported the yen in the medium term. As before, about 60.0% of analysts expect a 25-basis-point rate hike as early as the April meeting.

Meanwhile, last week Japanese Prime Minister Sanae Takaichi met with US President Donald Trump at the White House, where both sides announced the development of a joint action plan to finalize a multilateral trade agreement aimed at securing stable supplies of critical minerals. This initiative reflects growing concern over supply chain vulnerability and strategic dependence on individual suppliers. As part of the broader cooperation, the two sides signed a memorandum on the development of rare earth metals in waters around Minamitorishima Island, while also presenting a second investment package in the US economy worth up to 73.0 billion dollars, including the construction of small modular reactors and other strategic initiatives. The two governments intend to support 13 joint projects involving national companies, including Mitsubishi Materials Corp. and Sumitomo Metal Mining Co., aimed at stabilizing supply and reducing exposure to external risks.

Support and resistance levels

On the daily chart, Bollinger Bands are turning into a horizontal plane: the price range is narrowing from below, reflecting mixed ultra-short-term trading conditions. MACD maintains a relatively firm sell signal, remaining below the signal line. Stochastic has interrupted its confident advance, which had been driven by the instrument’s rise at the end of last week, so market participants should wait for clearer confirmation from the indicator.

Resistance levels: 159.00, 159.45, 160.00, 160.50.

Support levels: 158.50, 158.08, 157.50, 157.00.

Trading scenarios and USD/JPY forecast

Long positions may be considered after a confident breakout above 159.00 with a target at 160.00. Stop-loss — 158.50. Implementation period: 1–2 days.

A rebound from 159.00 as resistance followed by a breakout below 158.50 could become a signal for opening short positions with a target at 157.50. Stop-loss — 159.00.