26.03.202511:42 Forex Analysis & Reviews: USD/JPY. Analysis and Forecast

The Japanese yen remains under pressure today due to weak domestic economic data. In February, Japan's leading inflation indicator in the services sector rose by 3.0% year-over-year, slightly below the 3.1% increase recorded in January. This figure remains an important measure of inflation in Japan's service sector. Coupled with the upbeat sentiment in equity markets, this undermines the yen's safe-haven appeal.

However, Bank of Japan Governor Kazuo Ueda reaffirmed his intention to continue raising interest rates if economic and price developments align with forecasts outlined in the BoJ's quarterly outlook report. Combined with rising wages, this supports expectations of further monetary policy tightening. Substantial wage increases for the third consecutive year reinforce expectations of additional rate hikes by the central bank.

Meanwhile, some selling pressure on the U.S. dollar is helping the USD/JPY pair remain above the 150.00 level.

On the other hand, the U.S. Federal Reserve last week hinted at two potential 25-basis-point rate cuts by year-end. While the Fed raised its inflation forecast, it lowered the growth outlook due to uncertainties stemming from President Donald Trump's aggressive trade policies. Trump is expected to announce new tariffs taking effect on April 2, adding further uncertainty to the markets. Additionally, he imposed a secondary tariff on Venezuela, stating that any country purchasing oil or gas from Venezuela will face a 25% duty when trading with the U.S.

Growing pessimism over the U.S. economy has led to declining consumer sentiment for the fourth consecutive month. The Conference Board's Expectations Index fell to 65.2 — its lowest level in 12 years — indicating a potential recession. This pressured the U.S. dollar and led to a pullback from its nearly three-week high.

Despite hawkish remarks by Fed Governor Adriana Kugler about slowing progress in returning inflation to the 2% target, dollar bulls failed to gain the necessary support. Several upcoming speeches from Fed officials may influence the dollar's performance. For short-term momentum in USD/JPY, attention should also be given to the U.S. Durable Goods Orders report, but the key focus will be on Friday's Core PCE Price Index, which will likely shape the pair's next major moves.

Technical Outlook

A breakout above the 200-period Simple Moving Average (SMA) on the 4-hour chart is considered a key bullish signal.

The RSI (Relative Strength Index) on the daily chart is beginning to show positive momentum, pointing to potential further upside. However, the recent failure near the 151.00 level and a dip back below the psychological 150.00 mark warrant caution. Traders should wait for a solid confirmation above these levels before initiating new long positions to continue the pair's recovery.

The next leg higher could lift spot prices beyond the monthly high near 151.30 and toward the round 152.00 level.

Support Levels

On the other hand, the 149.55 level — yesterday's low — now offers immediate support. A break below this level could open the path toward 149.00, followed by stronger support around 148.78, which aligns with the 100-period SMA on the 4-hour chart. A breach of this zone may tilt the bias in favor of the bears and lead to further losses toward 148.00 and beyond.