The USDJPY pair is close to a key level as we await the US Non-Farm Payroll (NFP) data. Recent strong US economic figures and Fed Chair Powell’s hawkish remarks have boosted the US dollar. The ADP employment report and second-quarter GDP growth were better than expected, and Powell did not mention any rate cuts in September, which signals a change in interest rate outlook. Market predictions for rate cuts have changed. Now, they expect a reduction of 35 basis points by the end of the year, down from 47 basis points. Investors are paying close attention to the NFP report, particularly the unemployment rate that Powell highlighted. Meanwhile, the Bank of Japan (BoJ) has kept interest rates steady but raised its inflation forecasts, leading to minimal changes in the yen’s value.

Technical Analysis of USDJPY

For the yen to strengthen, we may need weak US data or rising Japanese inflation. Technically, the USDJPY has broken past the 148.30 resistance level and is targeting 151.00. A pullback to 148.30 could happen, but there’s still room for upward movement towards 155.00. In shorter timeframes, the bullish trendline supports upward momentum, as buyers rely on it to push towards new highs. Sellers are looking to see if the price drops to 142.35. Important upcoming events include the US NFP report and ISM Manufacturing PMI. We’re noticing a reduction in the long-standing policy gap between the US and Japan. The Fed has enacted two rate cuts since late 2024 due to a softer labor market, with the unemployment rate now at 4.2% according to the June 2025 report. However, with core inflation stubbornly at 2.8%, questions arise about further easing from the Fed.

Shifts in US and Japan Monetary Policies

The situation in Japan has changed since 2024. The BoJ increased its policy rate to 0.25% to address ongoing inflation, which the latest Tokyo Consumer Price Index shows is at 2.6%. This is a sharp contrast to when Governor Ueda seemed untroubled by yen weaknesses. For derivative traders, the pair is critical, currently trading around 152.50. The 151.20 level, previously a strong resistance we observed through late 2023 and 2024, is now an important support level for the upcoming weeks. Options traders might explore buying puts below 151.00 to prepare for a potential dovish shift from the Fed. All attention is on the upcoming US Non-Farm Payrolls for July, releasing soon. A weak jobs report could trigger new bets for a Fed cut in September, putting pressure on the pair and testing the 151.20 support. Conversely, a strong report could strengthen the Fed’s cautious approach and push us back towards the 155.00 level. Create your live VT Markets account and start trading now.

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