2026.07.13 2026.07.13
Yen Finds Support as Japan Signals Pension Pivot. Forecast as of 13.07.2026

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

When the old playbook stops working, it’s time to write a new one. The Japanese government appears to have concluded that the most effective way to support the yen is to reignite investors’ fears of capital repatriation. Let’s examine the latest developments and develop a trading strategy for the USD/JPY pair.

Major Takeaways

• The Japanese government has spooked investors with capital repatriation.
• The BoJ’s rate hike fails to help the yen.
• The unwinding of the carry trade will affect the yen.
• Short positions on the USD/JPY pair can be opened if the price declines below 161.8 and 161.5.

Weekly Fundamental Forecast for Yen

Japan sought to demonstrate its resolve by spending ¥11.7 trillion on currency interventions in April and May, while repeatedly warning speculators against pushing the yen lower. Yet the market refused to back down. The USD/JPY pair climbed to a 40-year high, prompting policymakers to recognize that displays of force alone were not enough. A more sophisticated strategy was needed—and they appear to have found one.

No, this is not about the Bank of Japan adopting a more hawkish tone. Nor is it about Cabinet officials emphasizing that they have no intention of interfering with the BoJ’s monetary policy decisions. At first glance, both developments seem supportive of the yen. After all, speculation that Sanae Takaichi could pressure the central bank to keep interest rates low was one of the factors fueling the USD/JPY rally. If the BoJ’s independence is no longer in doubt, that should, in theory, provide support for the Japanese currency.

The reality, however, is more complicated. Over the past two years, the Bank of Japan has raised interest rates five times, a move that should have narrowed the policy gap with the Fed and pushed USD/JPY quotes lower. Instead, the pair continued to surge even after the BoJ abandoned negative interest rates.

Japanese Government Bond Yields

Source: Bloomberg.

The government has now adopted a far stronger strategy. It has begun raising the prospect of what global markets have long feared: large-scale capital repatriation to Japan. Finance Minister Satsuki Katayama has said the government will encourage Japanese pension funds, including the Government Pension Investment Fund (GPIF), to increase their allocations to domestic assets. The GPIF alone manages roughly $1.8 trillion, while Japanese investors hold an estimated $5 trillion in overseas assets. Should even a fraction of that capital begin flowing back from the US and Europe to Japan, the yen would receive a powerful boost against the world’s major currencies.

FX Volatility Index

Source: Bloomberg.

Another factor weighing on USD/JPY is the potential unwinding of carry trades. According to Goldman Sachs, conditions for carry strategies are the most favorable in two decades, largely because market volatility has fallen to its lowest level since 2022. However, growing uncertainty surrounding the Fed’s policy stance under Kevin Warsh, coupled with renewed tensions in the Middle East, is driving volatility higher.

As volatility rises, the appeal of carry trades diminishes. Investors are more likely to unwind existing positions, creating demand for traditional funding currencies such as the euro, the Swiss franc, and the Japanese yen.

By raising the prospect of capital repatriation, the Japanese government has added another source of support for USD/JPY bears, alongside the unwinding of carry trades.

Weekly USDJPY Trading Plan

Whether the pair will be able to develop a correction will depend on US inflation data. Weak data will likely put pressure on the US dollar, allowing investors to sell the USD/JPY pair if the price slides below the 161.8 and 161.5 support levels.

This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

Price chart of USDJPY in real time mode

The euro is forecast to come under renewed pressure against the US dollar this month as rising energy prices reinforce expectations that the Federal Reserve may need to keep monetary policy tighter for longer, according to ING.

ING believes the deteriorating situation in the Gulf is proving more supportive for the US dollar than the euro, with higher oil and natural gas prices creating a particularly difficult backdrop for energy-importing Europe while simultaneously keeping US inflation concerns alive.

Why Higher Energy Prices Favour the US Dollar

According to ING, two themes are dominating currency markets: rising energy prices and strong demand for higher-yielding currencies.

The bank argues that renewed disruption risks in the Gulf are strengthening the US dollar because higher energy costs could keep Federal Reserve tightening expectations alive.

At the same time, Europe remains more vulnerable to higher energy prices, with natural gas costs beginning to climb again at a time when inventories remain relatively low.

That combination leaves the euro at a disadvantage against the dollar in the near term.

Why the Euro Is Losing Momentum

ING says last week’s corrective rebound in EUR/USD has already started to lose momentum.

The bank notes that higher gas prices have capped the euro’s recovery, while a relatively quiet Eurozone economic calendar means energy markets are likely to have a greater influence on short-term price action than comments from European Central Bank officials.

EUR/USD was trading close to 1.1414 on Monday afternoon after remaining largely unchanged over the past week, having already fallen more than 2% during June.

The Federal Reserve Holds the Key

ING believes upcoming US inflation data and testimony from Federal Reserve Chair Kevin Warsh will be the biggest catalysts for EUR/USD this week.

Although headline inflation may soften, the bank expects rising energy prices and resilient core inflation to keep the prospect of another Fed rate increase firmly on the table.

If markets continue to believe US interest rates could remain higher for longer, the dollar is likely to stay well supported against lower-yielding currencies such as the euro.

What’s the Forecast for the Euro versus the US Dollar?

ING expects EUR/USD to drift lower in the near term outlook.

The bank believes the exchange rate can easily fall towards 1.1360 and says a test of the 1.1300-1.1325 area is possible later this month if energy prices continue rising and markets maintain expectations for tighter US monetary policy.

Even so, ING does not expect that area to give way easily, suggesting it is likely to provide an important floor for EUR/USD during the summer unless the macroeconomic backdrop deteriorates further.

EUR/USD Forecast FAQ

Why does ING expect EUR/USD to weaken?

ING believes higher oil and natural gas prices favour the US dollar by keeping expectations for Federal Reserve tightening alive while simultaneously weighing on the euro through higher European energy costs.

What is ING’s near-term EUR/USD target?

ING believes EUR/USD can fall towards 1.1360 initially, with scope to test the 1.1300-1.1325 area later this month.

Why are natural gas prices important for the euro?

Europe remains heavily exposed to imported energy. Rising gas prices increase inflation risks and can weaken the region’s growth outlook, making the euro less attractive.

What could stop EUR/USD falling?

A decline in energy prices or signs that the Federal Reserve no longer needs to consider another interest rate increase would reduce support for the US dollar and could help stabilise EUR/USD.

Platinum price provided weak trading recently by its fluctuation near $1595.00 level, surrendering to the bearish trend, which depends on the continuation of forming a main resistance at $1810.00 level, besides the stability of the extra barrier near $1690.00 level.

The attempt to provide negative momentum by the main indicators might increase the negative pressure in the current trading, which makes us keep the negative scenario, which might target $1555.00 level, to press on the support at $1510.00, to find an exit for resuming the decline in the upcoming trading.

The expected trading range for today is between $1555.00 and $1640.00 

Trend forecast: Bearish

The EURJPY pair confirmed the dominance of the bearish trend by providing repeated closes below 185.85 level, forming strong decline in Friday, approaching the initial target at 184.20, which represents an extra support against the last bullish rally.

The contradiction of the main indicators might force the price to provide weak sideways fluctuation, confining the trading between the current support and 184.90 level, which represents an extra barrier against the bearish trading, while breaking the support and holding below it will open the way for targeting more negative stations, which might begin at 183.70 and 183.25.

The expected trading range for today is between 184.20 and 185.00

Trend forecast: Sideways