US rate cuts, stronger Japan GDP and a BOJ that could be leaning hawkish could drive USD/JPY lower. However, the technical analysis suggests the move lower may not be ready just yet. Here’s what to look for.
Why USD/JPY Now?
Markets still lean heavily toward a September Fed cut, keeping the dollar on the back foot even after a hot PPI blip. That cut probability has hovered in the mid-90s per CME FedWatch, and PPI’s pop didn’t really knock it off course.
From Japan’s point of view Q2 GDP beat forecasts, while wholesale inflation is still 2.6% YoY, cooling, but above the BoJ’s target narrative. The combination keeps talk of more BoJ tightening later in 2025 alive.
The USD/JPY price can correlate strongly with the US10Y bond yields which has been tracking lower of late. If this does continue it could drag USD/JPY lower too.
This setup I’m watching
Since early July, USD/JPY has chopped between 146–150 with a well-defined shelf around 146. That shelf looks like a neckline for a potential top. A decisive break could see sellers really step in.
Why I like it:
U.S. policy expectations could see USD weaker.
Japan data isn’t hot, but it’s firm enough to keep BoJ hike chatter alive into September.
Technicals show buyer fatigue into 148s and a clean trigger below 146s.