Cooling US inflation reduces Fed rate hike expectations, weighing on USD while BoJ tightening bets support JPY.
The USD/JPY pair trades slightly lower near 159.00 in Asian trading, remaining close to a nearly two-week high. Softening US inflation data has dampened expectations for an immediate Federal Reserve rate hike, pressuring the USD. Meanwhile, the Japanese Yen gains support from speculation that the Bank of Japan may further tighten policy.
Technical resistance at the 50% Fibonacci retracement level of 159.61 caps upside momentum. The Relative Strength Index sits at 56, signaling mild bullish sentiment, while the MACD has turned slightly negative. The pair’s recovery from early May lows near 155.20 has stalled, with geopolitical risks providing some support for the safe-haven USD.
Borrowing costs in Japan remain significantly lower than in other major economies, sustaining the JPY carry trade. Analysts warn that further gains may be limited unless the pair breaks above 159.61, with resistance near the 100-period exponential moving average looming.