USD/JPY forecast: Here’s why the Japanese yen is slumping today

The USD/JPY exchange rate continued rising this week, reaching its highest level since February 10 after Sanae Takaichi nominated two dovish central bank officials. It rose to a high 156, much higher than the year-to-date low of 152.28.

Sanae Takaichi nominates dovish Bank of Japan officials

The Japanese yen has retreated in the past few weeks, even as the US dollar debasement continued. This rally happened after Sanae Takaichi nominated Ayano Sato and Toichiro Asada to replace Asahi Noguchi and Junko Nakagawa.

The two officials are widely seen as being highly dovish, a move that may seek to counter the moderately hawkish governor, who has delivered several interest rate hikes. 

It recently hiked interest rates to 0.75%, the highest level in over 25 years. Most analysts believe that the bank will hike interest rates in the coming weeks.

The new nominations came a week after Takaichi met with Governor Kazuo Ueda and pressed against interest rate hikes.

The next major catalyst for the USD/JPY exchange rate will be the upcoming Japanese inflation, retail sales, and industrial production numbers.

Economists polled by Reuters expect the upcoming report to show that the Tokyo consumer price index (CPI) rose 1.5% in February. Core inflation, which excludes the volatile food and energy prices, rose 1.7% in January from 2.0%.

More data shows that Japan's industrial production rose 5.3% in January after falling by 0.1% in December. Also, retail sales are expected to come in at minus 0.4%.

Japan’s economy has done relatively well in the past few months, helped by the ongoing demand for semiconductors amid the ongoing artificial intelligence (AI) boom.

The USD/JPY exchange rate also jumped after the Supreme Court ruled against Donald Trump's tariffs on Friday.  Trump has now implemented a 10% global tariff using Section 122 rules that allow the president to impose tariffs that last for 150 days.

USD/JPY technical analysis 

The daily timeframe chart shows that the USD to JPY exchange rate has done well in the past few months, moving from a low of 139.94 in April last year to a high of 159 earlier this year. It then retreated to a low of 152.28 on January 27.

A closer look shows that the pair formed a double-bottom pattern at 152.28 and a neckline at 157. A double-bottom is one of the most common bullish reversal sign in technical analysis, which explains why it has rebounded in the past few days.

The pair is now approaching the Major S&R pivot point of the Murrey Math Lines tool. It has also moved above the 50-day and 100-day Exponential Moving Averages (EMA) and the Supertrend indicator.

Therefore, the most likely USD/JPY forecast is bullish, with the next key target being at 159.63, its highest level in January this year. A move above that level will point to more gains, with the next key target being the ultimate resistance level at 162.50.