The US dollar gained ground against the Japanese yen in the New York trading session on Monday, supported by declining yealds on Japanese government bonds. The USDJPY currency pair was at 149.39 at the time of writing, up by about 0.1%. The dollar had been on a three-day losing streak before then. Returns on 10-year Japanese government bonds declined to 1.42% as of this writing, down from 1.45%.
The Bank of Japan (BoJ) has indicated intentions to wind up the bond purchase program if interest rates keep rising. That is likely to see more buyers scramble to buy the assets, which could add downward pressure on the yen.
On the upside, Japan’s economy grew faster than expected in the quarter ending December 2024, putting a lid on USDJPY upside. According to data released on Sunday, the world’s third-largest economy saw its GDP grow by 0.7% during the quarter, beating the consensus forecast rate of 0.1%. The annualised rate was 2.8%, well above the median forecast figure of 1%.
US GDP figures will be out on Thursday this week, but greater forecast is likely to be on Personal Consumption Expenditure (PCE) reading set for release on Friday. The PCE figures carry more weight as they are the Fed’s prefered inflation gauge and the first one to assess the impact of economic policies under the Donald Trump administration.
USDJPY Forecast
USDJPY pivots at 149.17 and action above that level denotes bullish control. The pair wil likely move higher and encounter the first resistance at 149.80. However, a stronger upward momentum could clear that barrier and test the second resistance mark at 150.35.
Alternatively, going below 148.17 will favour the sellers to take control. The USDJPY pair will likely find initial support at 148.88. Meanwhile, breaking below that level will invalidate the upside thesis. Furthermore, it could strengthen the downward momentum and test the second support at 148.48.
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