USDJPY Price Update after Japan CPI Misses 1.6%
- USD/JPY edged up about 0.2% to 161.12 on Friday
- Japan's inflation rose to 1.5% year-on-year, but below the prediction 1.6%
- The wide interest gap between US Fed and BoJ continues to price shift
- Verbal intervention warnings from Tokyo are capping the upside
Why Is the Yen Staying Weak?
USD/JPY held firm above the 160 mark this week, trading near its strongest level since July 2024. On Friday, the pair edged up about 0.2% to 161.12 yen, steadying after dropping to a two-year low on Thursday.
The Inflation Rate Gap
The Bank of Japan lifted rates to 1.00%, the highest since 1995, yet that stays far below the Fed's 3.50%–3.75% range. This gap fuels the "carry trade," where investors borrow low-yielding yen to hold higher-yielding dollars.
According to a DBS (Development Bank of Singapore) analyst,
"Large speculative yen short positions have not eased despite the BOJ’s rate hike this week. Japan’s tolerance for yen weakness appears close to its limit. Policymakers may deploy both rhetoric and further market interventions to curb yen depreciation, with falling oil prices also offering some support to the currency."
A Hawkish Fed
Kevin Warsh's first FOMC meeting reinforced expectations of tighter US policy, with futures pricing roughly a 49% chance of a September rate hike (CME FedWatch).
Softer CPI Data
A below-forecast CPI (Consumer Price Index) data eases pressure on the BoJ (Bank of Japan) to keep hiking aggressively, leaving the yen on the back foot.
A Stronger Dollar
The US Dollar Index reclaimed 100 after a US–Iran agreement to end conflict improved risk sentiment, with shipping through the Strait of Hormuz returning to normal.
What do the Technical Indicators Say?
The broader uptrend stays intact above the 159.50 zone, with the 200-day EMA near 156.23 as support. Key levels to watch are-
Resistance level: 161.30 → 163.20
Support level: 158.00 → 156.23 (200-day EMA)
What Should Traders Do?
The trend favors the dollar, but the path is rarely one-way. Here's what traders may keep in focus:
- Follow the trend, but stay alert. The broader bias is bullish, yet rallies near multi-decade resistance carry real reversal risk.
- Watch 161.30 for upside. A confirmed break above this level could signal continuation toward 163.20 and beyond.
- Watch 158.00 for a turn. A close below this floor would warn of a deeper pullback.
- Stay alert to the news. Tokyo officials say they stand ready to respond to sharp currency moves at any time, and verbal warnings can trigger fast pullbacks.
- Manage size around events. Keep position sizes modest near policy releases; news-driven spikes near key levels can reverse quickly.
About the author:
Sarah ThompsonLead Forex Strategist & Financial Writer
Sarah Thompson is a professional Forex trader with over 7 years of experience in the financial markets. She specializes in Forex trading strategies, technical analysis, Gold and Indices market trends, risk management, and performance evaluation. Since joining SureShotFX in 2021, Sarah has authored numerous in-depth articles, reports, and insights for traders of all experience levels.
