• The USD/JPY forecast shows a decline in expectations for Fed rate cuts.
• The annual US CPI accelerated from 2.4% to 2.7%.
• Trump has threatened to impose a 25% tariff on Japan.

The USD/JPY forecast indicates a decline in Fed rate cut expectations, which has dashed hopes of a narrowing rate gap between the US and Japan. As a result, US Treasury yields soared while the yen collapsed to fresh lows. At the same time, market participants are worried about a likely 25% tariff on Japanese exports to the US. 

Initially, market participants were optimistic about the yen. The Fed and the Bank of Japan were following different monetary paths that would lead to a smaller gap in rates between Japan and the US. The Fed was looking to lower borrowing costs while the BoJ was hiking. 

However, all this paused when Trump started his aggressive tariffs campaign. The BoJ paused to assess the impact on Japan’s economy. Meanwhile, the Fed delayed cuts due to concerns about a potential spike in inflation. 

Data on Tuesday confirmed some of the Fed’s fears about tariffs boosting inflation. The annual headline CPI accelerated from 2.4% to 2.7%. At the same time, the monthly figure jumped from 0.1% to 0.3%. The data led to a decline in Fed rate cut expectations. 

At the same time, Trump has threatened to impose a 25% tariff on Japan. Such a move would pause the BoJ’s rate hike campaign.
 

USD/JPY key events today

• Core PPI m/m
• PPI m/m
   

USD/JPY technical forecast: Bulls approaching the 150.00 level 

(Click on image to enlarge)

USD/JPY 4-hour chart

On the technical side, the USD/JPY price has reached a new high above the key 148.02 resistance level. This has solidified the bullish bias. The price now trades well above the 30-SMA, showing bulls have a strong lead. At the same time, the RSI trades in the overbought region, indicating solid momentum. 

The price has maintained a bullish trend since it broke above the 30-SMA. It has made a series of higher highs and lows, respecting the SMA as support. Given the strong bullish bias, the uptrend is likely to continue. However, after making a solid swing, bulls might need to pause before reaching new highs. 

Therefore, the price might pull back to retest the 148.02 level as support. If it holds firm, the next target will be at the 150.00 key psychological level.

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