With the US non-farm payrolls to come in a busy week for US economic data, the USD/JPY is our featured currency pair this week. Earlier, the USD/JPY was trading sharply lower, along with all the other dollar crosses, with analysts pointing to reports suggesting that Trump’s aides may be contemplating a more lenient approach to tariffs as the reason for the greenback’s drop. In an interview, Trump had said that “I predict China’s Xi and I will get along, have been talking through representatives.” The key question now was whether Trump will issue any denials regarding this reportedly softer stance. Lo and behold, Trump shortly denied that he will pare back his tariff policy, and up went the dollar. Given his tough rhetoric so far, it’s hard to envision him adopting a more conciliatory tone when he takes office later this month. The dollar is now going to be more headline- driven and potentially boost the appeal of safe haven yen. For now, it may be too early to have a bearish USD/JPY forecast, especially ahead of this week’s key data highlights. But we could see the USD/JPY drift back lower in the days ahead anyway, as the focus turns to data and monetary policy.

Key US data to watch this week

Here’s a list of key US data to watch this week, which could impact the short-term USD/JPY forecast:

If this week’s data, especially the NFP report, fails to meet or exceed expectations then that could cause a bearish shift in the US dollar.

Longer-term USD/JPY Forecast point to a possible correction

The trend may often be your friend, but when it comes to the slightly longer-term USD/JPY forecast, I’m leaning against the prevailing momentum. While the currency pair has enjoyed a bullish streak, I believe the conditions are ripe for a reversal. However, timing is critical—a clear bearish confirmation and pattern are needed before taking action.

In 2024, analysts widely anticipated a stronger performance from the Japanese yen, driven by expectations of the Bank of Japan (BoJ) normalizing its ultra-loose monetary policy. Instead, the BoJ maintained its dovish stance, and the yen continued to weaken, pushing USD/JPY higher for a fourth consecutive year. By late 2024, the pair approached intervention-prone levels between 157.00 and 160.00. The pair was showing signs of struggle around this area again today.

Looking ahead, several factors suggest that the yen could stage a sharp rally in 2025, making a short USD/JPY an appealing trade idea. One factor behind this idea is the potential for the Bank of Japan to tighten its belt. In December 2024, the BoJ held its benchmark rate at 0.25%, disappointing those hoping for a hawkish pivot. Despite this, persistent above-target inflation could compel the central bank to tighten policy in 2025. Japan’s annual inflation climbed to 2.9% in November, driven by rising food and import costs. With inflation likely to remain elevated due to yen depreciation, the BoJ may act to align its policy more closely with global peers. Even a modest rate hike could strengthen the yen and weigh heavily on USD/JPY.

Unwinding of Trump trades

Today’s earlier reports that Trump will scale down tariff plans (which he later denied) means there is always the possibility we could see the unwinding of Trump trades in the coming weeks. After all, much of the dollar’s strength in 2024 stemmed from resilient US data and anticipation of pro-growth policies under Donald Trump. Should these policies falter in 2025, and Trump decides against imposing tough trade tariffs on imports from Eurozone and China, we could see the likes of the euro and yuan recover sharply. This resulting unwinding of “Trump trades” could further pressure USD/JPY lower.

Key Technical Levels to Watch on USD/JPY

Source: TradingView.com

From a technical perspective, the trend is still bullish on the USD/JPY, as evidenced by a rising trend line and key moving averages being below price.

While the pair remains in a bullish trend, a decisive break below the bullish trend line that has been in place since September could signal the start of a deeper correction.

In terms of levels to watch, the 156.75 to 160.00 range serves as a significant resistance zone. Ahead of the abovementioned trend line, there are a few levels to watch, including 156.00 and 155.00, now the most important short-term support levels.

In as far as the longer-term view is concerned, we will need to see a break below December’s low of 148.65 to provide a clearer bearish signal.

Meanwhile, if the USD/JPY refuses to buckle, and instead rises through the 160.00 region then I would imagine it might go on to take out the July high of 161.95 before the bears will have another attempt at driving the pair lower.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

January 6, 2025 – Written by David Woodsmith

STORY LINK Pound to Dollar Rate Week Ahead Forecast: GBP/USD Firm in Turbulent Week

Monday AM Brief: The Pound to Dollar exchange rate edged higher on Monday ahead of a number of US data releases expected this week.

On Monday, the Pound (GBP) experienced a slight rise against most of its major counterparts, even as the UK’s final services PMI for December was released.

The services PMI, a key indicator for the UK economy, registered at 51.1, falling just short of the expected 51.4.

Nonetheless, the GBP maintained its stability after the data was made public, showing resilience despite the minor discrepancy.

On Monday, the US Dollar (USD) failed to capture much investor interest and weakened against most of its major counterparts.

US investors appeared cautious about making significant bets on the ‘Greenback’ ahead of a busy economic calendar this week.

Key economic data releases are scheduled for the coming days: the latest labor data and PMIs will be out on Tuesday, the Federal Reserve’s FOMC meeting minutes will be released on Wednesday, and the crucial non-farm payrolls report along with the latest unemployment rate will be published on Friday.

Anticipation of these important economic indicators left USD exchange rates struggling to attract strong buying interest at the beginning of the week.

Looking ahead, the main driver of movement for the Pound US Dollar exchange rate on Tuesday will likely be the release of several high-impact economic data points from the US.

First up, the US will publish its latest ISM services PMI for December.

If the data shows another rise in this crucial sector, it could provide a lift to the ‘Greenback.’

Later in the day, the US will release its JOLT job openings survey for November.

Should the data remain around the positive levels seen in October, it could further support USD exchange rates.

On the Pound side, the UK will release its latest BRC retail sales monitor for December.

The data is expected to show a recovery, with a forecasted improvement from -3.4% to -0.2%.

If the figures meet these expectations and confirm an uptick in the UK’s retail sales, it could give a boost to GBP exchange rates.

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TAGS: Currency Predictions Pound Dollar Forecasts

With the US non-farm payrolls to come in a busy week for US economic data, the USD/JPY is our featured currency pair this week. Earlier, the USD/JPY was trading sharply lower, along with all the other dollar crosses, with analysts pointing to reports suggesting that Trump’s aides may be contemplating a more lenient approach to tariffs as the reason for the greenback’s drop. In an interview, Trump had said that “I predict China’s Xi and I will get along, have been talking through representatives.” The key question now was whether Trump will issue any denials regarding this reportedly softer stance. Lo and behold, Trump shortly denied that he will pare back his tariff policy, and up went the dollar. Given his tough rhetoric so far, it’s hard to envision him adopting a more conciliatory tone when he takes office later this month. The dollar is now going to be more headline- driven and potentially boost the appeal of safe haven yen. For now, it may be too early to have a bearish USD/JPY forecast, especially ahead of this week’s key data highlights. But we could see the USD/JPY drift back lower in the days ahead anyway, as the focus turns to data and monetary policy.

Key US data to watch this week

Here’s a list of key US data to watch this week, which could impact the short-term USD/JPY forecast:

If this week’s data, especially the NFP report, fails to meet or exceed expectations then that could cause a bearish shift in the US dollar.

Longer-term USD/JPY Forecast point to a possible correction

The trend may often be your friend, but when it comes to the slightly longer-term USD/JPY forecast, I’m leaning against the prevailing momentum. While the currency pair has enjoyed a bullish streak, I believe the conditions are ripe for a reversal. However, timing is critical—a clear bearish confirmation and pattern are needed before taking action.

In 2024, analysts widely anticipated a stronger performance from the Japanese yen, driven by expectations of the Bank of Japan (BoJ) normalizing its ultra-loose monetary policy. Instead, the BoJ maintained its dovish stance, and the yen continued to weaken, pushing USD/JPY higher for a fourth consecutive year. By late 2024, the pair approached intervention-prone levels between 157.00 and 160.00. The pair was showing signs of struggle around this area again today.

Looking ahead, several factors suggest that the yen could stage a sharp rally in 2025, making a short USD/JPY an appealing trade idea. One factor behind this idea is the potential for the Bank of Japan to tighten its belt. In December 2024, the BoJ held its benchmark rate at 0.25%, disappointing those hoping for a hawkish pivot. Despite this, persistent above-target inflation could compel the central bank to tighten policy in 2025. Japan’s annual inflation climbed to 2.9% in November, driven by rising food and import costs. With inflation likely to remain elevated due to yen depreciation, the BoJ may act to align its policy more closely with global peers. Even a modest rate hike could strengthen the yen and weigh heavily on USD/JPY.

Unwinding of Trump trades

Today’s earlier reports that Trump will scale down tariff plans (which he later denied) means there is always the possibility we could see the unwinding of Trump trades in the coming weeks. After all, much of the dollar’s strength in 2024 stemmed from resilient US data and anticipation of pro-growth policies under Donald Trump. Should these policies falter in 2025, and Trump decides against imposing tough trade tariffs on imports from Eurozone and China, we could see the likes of the euro and yuan recover sharply. This resulting unwinding of “Trump trades” could further pressure USD/JPY lower.

Key Technical Levels to Watch on USD/JPY

Source: TradingView.com

From a technical perspective, the trend is still bullish on the USD/JPY, as evidenced by a rising trend line and key moving averages being below price.

While the pair remains in a bullish trend, a decisive break below the bullish trend line that has been in place since September could signal the start of a deeper correction.

In terms of levels to watch, the 156.75 to 160.00 range serves as a significant resistance zone. Ahead of the abovementioned trend line, there are a few levels to watch, including 156.00 and 155.00, now the most important short-term support levels.

In as far as the longer-term view is concerned, we will need to see a break below December’s low of 148.65 to provide a clearer bearish signal.

Meanwhile, if the USD/JPY refuses to buckle, and instead rises through the 160.00 region then I would imagine it might go on to take out the July high of 161.95 before the bears will have another attempt at driving the pair lower.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

Created on January 06, 2025

• For ten consecutive trading sessions, the USD/JPY pair has been moving within narrow ranges with a strong bullish bias, with gains reaching the resistance level of 158.00.
• This is the highest for the pair in five months, paving the way for bulls to move towards the psychological resistance of 160.00.

From now on, you may notice an increase in Japanese statements about the possibility of intervening in the exchange markets to prevent further collapse of the Japanese yen, which historically contradicts the policies of the upcoming US administration, as Trump refuses to intervene in the exchange markets. Keep in mind that the movement of the dollar against the Japanese yen price for long periods in narrow ranges portends a strong move in one of the two directions.

Trading Tips:

We still recommend buying the dollar against the Japanese yen from every downward level, but without risk and placing stop loss profit orders

US Dollar Performance Awaits the Future of Interest Rate Policies

The US dollar is trading near its two-year high, supported by a shift in US Federal Reserve policies and the continuation of Trump’s trade. The Federal Reserve has cut US interest rates by a full percentage point in three steps since September 2024. Federal Reserve Chairman Jerome Powell described the latest move as “closer to a call,” adding that the federal funds rate is now “much less restrictive.” It currently falls within the range of 4.25% to 4.5%.

Fed officials’ expectations for US interest rates this year indicate a median estimate of only two more cuts this year. Also, four officials preferred not to cut US interest rates at all in December 2024. Moreover, Cleveland Federal Reserve President Beth Hammack opposed the decision in favour of keeping interest rates steady.

USD/JPY Technical Analysis and Expectations Today:

The USD/JPY pair recently retreated to trade at the 100-hour moving average line. However, the pair continues to move towards the overbought levels of the 14-hour Relative Strength Index (RSI). In the near term, bulls will look to extend the current rally towards the 157.75 resistance levels and then the 158.90 resistance levels respectively. On the other hand, bears will look to take advantage of the selling to move towards the 156.80 support levels or lower at the 155.95 support.

In the long term, according to the performance on the daily chart, the USD/JPY pair is trading within an ascending channel formation. Also, the 14-day RSI supports a long-term bullish bias as it is about to enter overbought levels. Therefore, bulls will look to move towards stronger highs beyond the usual Japanese intervention levels reaching the 161.20 and 164.00 resistance levels respectively. In contrast, and over the same period of time, bears will look to move with renewed profit-taking selling operations, reaching the support levels of 155.30 and then the support of 152.00, respectively.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.