• USD/JPY rebounded sharply from 140.00 to 148.65 but quickly reversed, showing signs of a failed bullish breakout amid profit-taking and technical resistance.
• The Bank of Japan held rates steady and cut its growth forecast, reinforcing expectations of a slower pace of policy normalization in 2025.
• US-Japan 10Y and 2Y yield spreads continue to narrow, putting downside pressure on USD/JPY and signalling weakening dollar-yen fundamentals.
• Bearish momentum resurfaced in USD/JPY, but a break above 149.00 would invalidate the bearish scenario and open the door to 151.30–154.50.

This is a follow-up analysis of our prior report “”, dated 17 April 2025.

Since our last publication, the has staged an initial push down to test the first medium-term support zone of 140.30/140.00, as highlighted (it printed an intraday low of 139.89 on 22 April).

Before the expected relief US dollar bounce took shape, the USD/JPY rallied by 4.4% to hit an intraday high of 145.93 on 2 May.

A setback occurred, causing it to slide towards an intraday low of 142.35 on 6 May.

A Pause in JPY Strength Due to BoJ and Risk-On Sentiment

The initial two weeks of US dollar strength against the Japanese yen have been reinforced by the recently concluded Bank of Japan (BoJ) monetary policy decision meeting last Thursday, 1 May. The BoJ switched into a “dovish hold” stance by keeping its short-term policy unchanged at 0.5% but slashed its current fiscal year growth forecast to 0.5% from 1.1%, citing trade tariff uncertainty.

However, the Japanese yen’s strength against the US dollar was short-lived as the USD/JPY managed to propel higher by 4.4% to hit a high of 148.65 on Monday, 12 May, triggered by a renewed bout of risk-on sentiment over the growing optimism of US-China trade tensions de-escalation.

BoJ’s Normalisation Monetary Policy Is Likely to Be Less Hawkish

Fig 1: Japan implied forward short-term interest rate curve as of 15 May 2025 (Source: Macro Micro)

Market expectations for Bank of Japan rate hikes in 2025 have softened compared to three months ago. The forward-implied short-term policy rate, derived from interest rate futures, has shifted lower, now projected at 0.66% by December 2025, down from 0.83% previously. However, this remains slightly above the 0.57% level seen just a month ago (see Fig 1).

However, other factors can support a potential resurgence of Japanese yen strength.

US Treasuries-JGBs Yield Spreads Remain Below Key Resistances

Fig 2: 10-YR & 2-YR yield spreads of US Treasuries/JGBs medium-term trends as of 16 May 2025 (Source: TradingView)

Since 6 January 2025, the and yield spreads of the US Treasury notes over Japanese Government Bonds (JGBs) have continued to narrow (trended downwards) below their respective key medium-term pivotal resistances of 3.60% and 3.84%, respectively.

If their downward trajectory remains intact, the 10-year and 2-year yield spreads of the US Treasury notes over JGBs may see further downside towards 2.47% and 2.90% next, which in turn may trigger further downside pressure on the USD/JPY (see Fig 2).

A Failure Bullish Breakout in the USD/JPY Technical Chart

Fig 3: USD/JPY medium-term trend as of 16 May 2025 (Source: TradingView)

The USD/JPY’s swift intraday rally of 2.1% seen on Monday, 16 May, is the best single-day gain of the USD/JPY since 17 June 2022.

Interestingly, the bullish momentum of the US dollar’s strength was short-lived, and the USD/JPY staged a decline of -2.5% to print an intraday low of 144.92 on Friday, 16 May at the time of writing, which wiped out its initial gains (see Fig 3).

In addition, the price actions of the USD/JPY have reintegrated back below its 50-day moving average and the medium-term descending trendline from its 10 January 2025 swing high, coupled with a bearish momentum condition being flashed out on its daily RSI momentum indicator.

Hence, the rally of 16 May is likely considered a “head fake” failure, a bullish breakout. Watch the 149.00 key medium-term pivotal resistance (also the key 200-day moving average), and a break below the 144.10 key intermediate support may see further weakness on the USD/JPY to retest 140.30/140.00 medium-term support in the first step before exposing the next medium-term supports at 138.90 and 137.10/136.50.

On the other hand, a clearance above 149.00 invalidates the bearish scenario for a recovery towards the next medium-term resistances at 151.30 and 154.50.

Original Post

The GBPJPY pair affected by the bearish correctional bias domination, to settle near the support at 193.15, the continuation of the main indicator’s contradiction might force the price to provide new mixed trading, but its stability above the mentioned support will increase the chances for renewing the bullish attempts, which targets 194.55 level, to extend the trading towards the next resistance at 195.70.

In case reaching below the current support, we recommend the neutrality and monitoring the price behavior due to the factors that assist to decrease the negativity, starting from the moving average 55 stability below the current trading and its stability near 192.05, besides the continuation of forming a solid support at 191.40 level, to decrease the chances for renewing the negative attack on the upcoming trading.

The expected trading range for today is between 193.00 and 194.55

Trend forecast: Bullish

The GBPJPY pair affected by the bearish correctional bias domination, to settle near the support at 193.15, the continuation of the main indicator’s contradiction might force the price to provide new mixed trading, but its stability above the mentioned support will increase the chances for renewing the bullish attempts, which targets 194.55 level, to extend the trading towards the next resistance at 195.70.

In case reaching below the current support, we recommend the neutrality and monitoring the price behavior due to the factors that assist to decrease the negativity, starting from the moving average 55 stability below the current trading and its stability near 192.05, besides the continuation of forming a solid support at 191.40 level, to decrease the chances for renewing the negative attack on the upcoming trading.

The expected trading range for today is between 193.00 and 194.55

Trend forecast: Bullish

Gold price struggles to capitalize on the previous day’s solid rebound from over a one-month low and consolidates below the $3,250 level during the Asian session amid the US-China trade deal optimism. Meanwhile, signs of easing inflation in the US and weaker consumer spending data lift Fed rate cut bets. The outlook drags the US bond yields lower and undermines the USD, supporting the non-yielding yellow metal.

May 15, 2025 – Written by David Woodsmith

STORY LINK Euro to US Dollar Forecast: EUR Drifts Into “Bearish Territory”

The Euro to Dollar exchange rate (EUR/USD) has fluctuated around 1.1200 on Thursday and settled close to this level after the raft of US data.

Scotiabank notes that overall volatility has eased and added; “Near-term support is expected below 1.1100 and recent resistance has been observed above 1.1250.”

According to ING; “We see EUR/USD trading in a 1.11-1.15 range over the coming weeks and months, although risks are skewed to the upside. 1.1265 is now decent intra-day resistance.”

US retail sales increased 0.1% for April, in line with consensus forecasts and followed an upwardly-revised 1.7% gain the previous month. Underlying sales also increased 0.1% on the month, but the control group recorded a 0.2% monthly decline compared with expectations of a 0.3% gain.

Producer prices declined 0.5% for the month compared with expectations of a 0.2% gain while core prices declined 0.4%.

There was no significant shift in interest rate expectations following the data.

As far as business confidence is concerned, the New York manufacturing index edged lower to -9.2 for May from -8.1 previously.

Companies were marginally more positive on the outlook with mixed inflation pressures.

The Philadelphia Fed index improved to -4 for May from -26.4 in April while there was stronger upward pressure on prices. Companies were notably more optimistic over the outlook with on-going inflation pressures.

The dollar’s fundamental outlook remained a key market focus. US bond yields edged lower as markets considered the longer-term fiscal outlook.

According to ING; “The topic involves a lot of speculation about what might happen, but the evidence is also starting to support the diversification thesis.”

There was evidence of strong buying of Japanese bonds and equities for the month.

ING added; “instead of April being a month of deleveraging and global asset managers merely downscaling and repatriating, April proved a month of diversification into Japanese assets by foreign accounts. That looks like a big tick in the box of the diversification element of de-dollarisation.”

The US Treasury has denied that it is looking to weaken the dollar, but Commerzbank is not convinced and considers that there are slightly more subtle ways of achieving the objective.

It noted; “it can also be achieved with a sufficient number of bilateral agreements. One with South Korea, one with Japan, and so on. Now, it is by no means plausible that these countries want to revalue their own currencies against the dollar. But it is easier – at least from the perspective of the US president and his ‘neorealist’ advisors – to force them to do so one by one.”

Danske Bank added; “a negative risk premium remains embedded in the USD, which continues to trade meaningfully away from fundamentals and pre-Liberation Day levels, reflecting eroding confidence in the greenback.”

It added; “Longer term, structural challenges like US and euro area political shifts, trade uncertainty, and capital rotation out of US assets suggest considerable USD downside.”

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