Japanese Yen bulls maintain intraday dominance as USD/JPY hovers near the vulnerable 147.00 level

The Japanese Yen (JPY) continues to strengthen against a softer US Dollar (USD) for the second consecutive day, with the USD/JPY pair trading near the 147.00 mark during the European session on Wednesday. The JPY's gains are underpinned by hawkish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, who signaled the possibility of further policy normalization. In contrast, the USD is weighed down by expectations of at least two Federal Reserve (Fed) rate cuts this year, reinforced by softer US consumer inflation data.

Optimism surrounding the US-China tariff truce, which entails a 90-day pause in tariff escalation, is bolstering equity markets but has limited impact on curbing the intraday bullish momentum of the safe-haven JPY. The divergence in BoJ and Fed policy outlooks suggests that the JPY remains positioned for further appreciation, while the USD/JPY pair remains vulnerable to downside moves. Traders are now eyeing upcoming speeches from influential Federal Open Market Committee (FOMC) members for potential direction.

BoJ Signals Further Hikes While Softer US Inflation Caps USD Strength

• Data released on Wednesday indicated a 0.2% rise in Japan's Producer Price Index (PPI) for April, with the annual rate easing to 4% from 4.2% the previous month. Despite muted market reaction, the JPY finds support as BoJ Deputy Governor Uchida reiterated that rate hikes will continue if the economic outlook aligns with forecasts. Uchida also noted that Japan's economic growth might slow before picking up as global economies recover.
• On the other hand, reduced bets on aggressive Fed policy easing are driven by softer US inflation data, with the US Bureau of Labor Statistics (BLS) reporting a decline in the headline Consumer Price Index (CPI) to 2.3% YoY in April from 2.4% previously. Core CPI, excluding food and energy, rose 2.8% YoY, aligning with forecasts. This has kept the USD subdued below recent highs, applying downward pressure on the USD/JPY pair.
• Despite the JPY's strength, positive sentiment around the US-China tariff deal might temper aggressive JPY buying. US President Donald Trump recently described US-China relations as "excellent" after the two countries agreed to a 90-day pause in tariff escalation, easing global trade tensions.

Technical Analysis: USD/JPY Eyes Downside amid Bearish Bias

From a technical perspective, the recent breach of the 200-period Simple Moving Average (SMA) on the 4-hour chart, combined with bullish indicators on the daily chart, suggests that a dip below 147.00 could still be viewed as a buying opportunity near the 146.60-146.55 area, which corresponds to the 23.6% Fibonacci retracement level from April's low. A decisive break below this level could lead to technical selling, targeting the 146.00 mark, the 145.40 region (38.2% Fibo. level), and the 145.00 psychological support.

Further downside could see the pair test the 144.80-144.75 zone, near the 200-period SMA on the 4-hour chart, with a clear break below potentially invalidating the positive outlook.

On the upside, the 147.65 zone is the immediate resistance. A break above this level could push the pair to the 148.00 round figure, followed by the 148.25-148.30 zone and the one-month high of 148.65. Continued bullish momentum may see the pair challenge the 149.00 mark, the 149.65-149.70 region, and ultimately the key psychological resistance at 150.00.