• In today's trading, the value of the yen fell to more than 157 yen per dollar, reaching its lowest level in four weeks and facing pressure from strong dollar and Treasury yields.
• Clearly, these moves came as a lackluster US government debt auction raised concerns about demand for US Treasuries, while a Fed official added fuel to concerns about US interest rates.
• This keeps the wide gap between US and Japanese yields intact, encouraging yen carry trades.
• According to forex market trading, the USD/JPY price rose to the 157.40 resistance level and is stable around it at the time of writing the analysis.

(Click on image to enlarge)

Meanwhile, Bank of Japan board member Seiji Adachi said that the central bank could raise interest rates if the sharp decline in the yen leads to further inflation. According to economic calendar data, last week, data showed that Japan's core inflation rate slowed to 2.2% in April from 2.6% in March due to moderating food inflation, in line with expectations. Also, the headline rate fell to 2.5% in April from 2.7% in March, declining for the second consecutive month.
 

US Central Bank Policy

"Most people thought we would be in a recession by the end of last year, and that hasn't happened. Instead, we've had very strong growth. US consumers have remained remarkably resilient, and the housing market has also remained resilient. So, I don't see any need to rush into cutting rates. I think we need to take our time and do it right."

The US Federal Reserve member also said: “Most people thought we would be in a recession towards the end of last year, and that did not happen.” Instead, we achieved very strong growth. American consumers have remained remarkably resilient, and the housing market has remained resilient. Therefore, I do not see the need to rush and lower interest rates. Also, “I think we have to take our time and do it right.”

He added, “At the beginning of this year, inflation moved sideways, which raised questions in my mind: Will the deflation process continue, or will we fall to an inflation level above 3%?” furthermore, “I think it is still too early to know and we will have to wait and see to gain more confidence. Ultimately, I don't think we should rule anything out at this point. We are all committed to bringing inflation back to our 2% target.”
 

USD/JPY Technical Analysis and Expectations Today

The ongoing divergence between the future policies of the US Federal Reserve and the Bank of Japan will remain a significant factor in maintaining the upward trend of the USD/JPY exchange rate. Technically, this trend may continue until Japanese intervention in the currency markets to prevent further depreciation of the yen, which harms the Japanese economy. According to the current performance, the nearest resistance levels for the upward trend are 157.85, 158.20, and 159.00, respectively. Furthermore, with the understanding that these levels may be sufficient to push all technical indicators towards strong overbought conditions, as shown in the daily chart above.

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