rose to 160.52 on Thursday, marking its highest level since July 2024. The Japanese yen remains under significant pressure despite a notable acceleration in producer price inflation in Japan.
According to the latest data, Japan's producer price index (PPI) rose 6.1% year-on-year in May, up from a revised 5.3% in April. The figure exceeded market expectations of 5.5% and reached its highest level in three years. Rising energy costs and a weak yen remain the main drivers of producer price growth.
Better-than-expected inflation data has reinforced expectations that the Bank of Japan could raise interest rates as soon as its next policy meeting. Market participants increasingly believe that the central bank will need to respond to rising inflationary pressures, exacerbated by the conflict in the Middle East and the continued depreciation of the Japanese currency.
Investor attention is also focused on comments from Bank of Japan Governor Kazuo Ueda, with markets looking for clearer signals on the future direction of monetary policy. Investors are already pricing in the possibility of another rate hike in September and are not ruling out an additional move in December.
Despite these expectations, the yen remains under pressure. The strength of the US dollar and expectations that the Federal Reserve will maintain a restrictive policy continue to outweigh support for possible rate hikes from the Bank of Japan.
Technical analysis
According to the H4 chart, USD/JPY is trading within a consolidation range around the 160.30 level and is developing an upward movement towards 160.85. This target is expected to be reached today, followed by a corrective pullback towards 160.30. The MACD indicator supports this scenario, with its signal line above zero and pointing firmly upwards, indicating that the bullish momentum remains intact.
On the H1 chart, USD/JPY is building a bullish structure towards 160.85. A correction towards 160.30 may follow before another advance towards 160.90, with room for the broader trend to extend to 162.00.
The stochastic oscillator confirms this perspective. Its signal line remains above the 50 level and moves towards 80, suggesting that the bullish momentum is likely to persist in the near term.
Conclusion
USD/JPY continues to benefit from the strength of the US dollar and expectations of a prolonged tightening of Federal Reserve policy, despite growing speculation about further rate hikes from the Bank of Japan. While the pair remains firmly bullish, its approach to new multi-year highs may increase market sensitivity to any sign of intervention or policy change by the Japanese authorities.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
