1 August 2025,05:56
Daily Market Analysis
1 August 2025, 05:56
Key Takeaways:
*BoJ expected to hold, but rate hike risks linger as inflation stays sticky.
*Trade deals with the U.S. eases external pressures, giving BoJ policy space.
*Cautious tone likely from BoJ, but upward inflation forecast may stir hike expectations.
The Japanese yen continues to trade near multi-month lows, with USD/JPY hovering just below the critical ¥151 level. The Bank of Japan’s latest policy decision offered few surprises, as policymakers held the benchmark rate steady at 0.5% and emphasized “receding uncertainty” following the U.S.-Japan trade accord. That agreement—highlighted by a reduction in U.S. auto tariffs to 15% and a pledge of $550 billion in Japanese investment—has provided short-term relief, but structural pressures on the yen persist.
Chief among these is the widening yield differential between Japan and the United States. With 10-year U.S. Treasury yields holding firm around 4.35%, and no signal of tightening from the BOJ, the yen remains highly sensitive to any shift in global rate expectations. Intervention risks from Japanese authorities have resurfaced as USD/JPY flirts with ¥152, but without coordinated action or dovish signals from the Federal Reserve, unilateral FX measures may prove limited in impact.
On the data front, Japan’s June retail sales rose 1.0% month-on-month, while industrial production gained 1.7%, suggesting pockets of economic strength. However, the BOJ’s revised 2025 inflation forecast of 2.7% reflects cost-push rather than demand-led pressures—keeping the bank on the sidelines in the near term.
Unless the Fed pivots decisively or risk-off flows emerge, the yen is likely to remain weak. Traders are watching for any escalation in Middle East tensions or U.S. data disappointments that could drive safe-haven demand back into JPY.
Technical Analysis
USDJPY, H4:
USD/JPY is extending its bullish momentum, trading near 150.73 after breaking decisively above the 148.90 resistance level. The breakout was fueled by strong buying pressure following a successful retest of the ascending trendline support, which reinforced the broader uptrend. With price action now approaching the key psychological resistance at 151.10, traders will be watching for signs of either a breakout continuation or potential profit-taking at this level.
Momentum indicators remain supportive of the bullish structure. The Relative Strength Index (RSI) has climbed to 72, entering overbought territory and signaling that buyers are firmly in control, though some caution of a pullback is warranted. Meanwhile, the MACD is firmly bullish, with a widening signal line spread and histogram bars expanding above the zero line, reflecting strong upward momentum.
Overall, USD/JPY retains a constructive outlook above 148.90, with bulls eyeing a sustained push beyond 151.12 for a potential move toward new highs. However, failure to clear this resistance could trigger a short-term pullback, with immediate support resting at 148.90 and deeper support at 147.15.
Resistance Levels: 151.10, 152.75
Support Levels: 148.90, 147.15
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