empty
28.02.2025 12:01 AM
Yen Continues to Target Further Strengthening

The dollar received a significant boost on Thursday following the release of the second GDP estimate for Q4, which reported an economic growth rate of 2.3%. While this figure was expected, the price index was revised upward from 2.2% to 2.4%. Additionally, the Personal Consumption Expenditures (PCE) index, which reflects the growth of personal consumption expenditures in both core and overall terms, showed an increase. This latter development raises questions about easing inflationary pressures, but consumer demand remains robust. The PCE data for January will be released on Friday, and if it indicates a rise, it could lead to a substantial re-evaluation of Federal Reserve rate forecasts, thereby increasing demand for the dollar.

This image is no longer relevant

Furthermore, durable goods orders also exceeded expectations, indicating a strengthening of production capacity, which indirectly suggests resilience in consumer spending. Given the confirmed threat of renewed inflationary pressures, it is quite possible that the dollar will attempt to strengthen further against major currencies today.

The yen could face significant challenges ahead. With the release of the Tokyo region inflation index for February scheduled for Thursday night, concerns were mounting that inflation may exceed last month's figures. This could place additional pressure on the Bank of Japan to implement another rate hike. If the forecast holds true, the yen may rebound from its recent decline.

Currently, the market anticipates that the BOJ could raise rates twice this year. This pace is expected to moderately strengthen the yen without causing drastic fluctuations. However, if inflationary pressures turn out to be stronger than expected, the market might adjust its outlook, predicting three rate hikes instead of two. Such a shift could potentially lead to a significant decrease in the USD/JPY exchange rate, possibly reaching the September low of 139.59.

The bond market is already adjusting to the possibility of three rate hikes, as evidenced by the recent rise in yields on 10-year Japanese Government Bonds (JGBs) above 1.4%. This trend reflects growing concerns that the BOJ's next rate hike may occur sooner than anticipated, and that future interest rates may be higher than 1%.

The uncertainty arising from the new U.S. administration could work in favor of the Japanese currency. Trump has not made any statements regarding the yen, and any significant changes that increase uncertainty could heighten demand for defensive assets. Therefore, there is currently no reason to expect the USD/JPY exchange rate to rise.

During the reporting week, net long positions on the yen increased by 502 million, bringing the total to 4.98 billion. This indicates a slow but steady shift in favor of the yen. Meanwhile, the settlement price continues to decline.

This image is no longer relevant

In the previous review, we discussed the potential for a breakout at the 148.68 support level. This target was achieved; however, the yen did not strengthen further. Following Thursday's data release, the dollar has gained considerable strength, but it remains uncertain how the swaps market will respond to the Fed's rate forecast.

We anticipate that the yen may strengthen further, with another attempt to breach the 148.68 support level, potentially leading to a decline toward the 146.80/147.00 range. Although we expect a rise in the dollar after the release of Friday's PCE data, we do not anticipate a significant increase. The USD/JPY pair is likely to encounter resistance within the bearish channel at either 150.90 or slightly above 151.60/80, after which we expect it to decline.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

US Dollar: Weekly Preview

America will once again be a major focus in the news. Surprisingly, it won't primarily be due to economic updates or the Federal Reserve meeting, but rather news surrounding Donald

Chin Zhao 23:05 2025-03-16 UTC+2

EUR/USD Weekly Preview: All Eyes on the Fed

After experiencing a significant surge of 500 pips, the EUR/USD pair has settled into a period of stagnation, awaiting further news. The Federal Reserve may either alleviate or heighten concerns

Irina Manzenko 23:05 2025-03-16 UTC+2

What to Pay Attention to on March 17? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic events scheduled for Monday, with the only notable report being on retail sales in the US. It's important to note that the market has shown

Paolo Greco 22:27 2025-03-16 UTC+2

A New Problem Rises for America – The Debt Ceiling (Expecting #SPX and #NDX to Resume Their Decline After a Likely Short-Term Recovery)

The confrontation between the U.S. and the EU has entered a new phase. The U.S. president is taking a hardline approach toward Europe, effectively following a "tit for tat" strategy

Pati Gani 14:06 2025-03-14 UTC+2

USD/JPY: Analysis and Forecast

The Japanese yen is losing ground today. Positive news on U.S.-Canada trade negotiations and reports that Democrats have secured enough votes to prevent a U.S. government shutdown are improving global

Irina Yanina 13:33 2025-03-14 UTC+2

XAU/USD: Analysis and Forecast

Gold is consolidating after reaching a new all-time high. Concerns over U.S. President Donald Trump's aggressive trade policy and its impact on the global economy continue to drive demand

Irina Yanina 10:08 2025-03-14 UTC+2

What to Pay Attention to on March 14? A Breakdown of Fundamental Events for Beginners

There are few macroeconomic events scheduled for Friday, and none of them are significant. The UK will release reports on GDP and industrial production, but strong figures are not expected

Paolo Greco 07:05 2025-03-14 UTC+2

GBP/USD Pair Overview – March 14: The Last Day of the Week as a Mere Formality

On Thursday, the GBP/USD currency pair also began a slight downward correction. While the pound did not depreciate significantly, explaining why it rose for two weeks is difficult. Of course

Paolo Greco 02:39 2025-03-14 UTC+2

EUR/USD Pair Overview – March 14: Maybe That's Enough?

The EUR/USD currency pair finally began to decline on Thursday, but once again, this movement was not linked to macroeconomic factors or fundamental events. It wasn't even related to Donald

Paolo Greco 02:39 2025-03-14 UTC+2

EUR/USD: A Southern Impulse That Should Not Be Trusted

On Thursday, the EUR/USD pair reached a three-day low of 1.0823 but did not break into the 1.07 range, as the downward momentum gradually faded. The EUR/USD pair is currently

Irina Manzenko 23:55 2025-03-13 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.