USD/JPY Outlook: Yen Recovers as Greenback Retreats

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  • The dollar was weak as markets in the US stayed closed for a holiday.
  • The yen has fallen by about 6% in 2024 due to a decline in US rate cut expectations.
  • Some experts believe that the Fed will fail to achieve a soft landing.

Monday’s USD/JPY outlook leaned slightly bearish, with the yen showing a modest recovery from recent lows. Simultaneously, the dollar exhibited weakness, given the closure of US markets for a holiday.

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However, the pair remains near $150.00 keeping investors on high alert to the possibility of an intervention by Japanese authorities. Officials from the Ministry of Finance in Japan have repeatedly warned against currency declines.

Notably, the yen has fallen by about 6% in 2024 due to a decline in US rate cut expectations. Data from the US in recent months has shown a resilient economy. Moreover, inflation data last week came in higher than expected, highlighting the need for high interest rates in the US. As a result, the possible timing for the first Fed rate cut is in June. Additionally, markets expect a smaller cut to interest rates in 2024.

However, although inflation remains high in the US, some data points to an economic slowdown. Notably, there was a sharp decline in retail sales and jobless claims have been on the rise. Therefore, some experts believe that the Fed will fail to achieve a soft landing, meaning a possible recession.

Meanwhile, in Japan, although markets expect a policy shift, the BoJ has dimmed hopes for aggressive rate hikes. Moreover, the interest rate differentials between Japan and the US have remained wide, leading to the yen’s decline.

USD/JPY key events today

Investors do not expect any major economic releases from Japan on the US.

USD/JPY technical outlook: Bears push for a reversal at the 150.00 support

USD/JPY outlook
USD/JPY 4-hour chart

On the technical side, the USD/JPY price is declining after pulling back to retest the recently broken channel support. For a long time, the price has traded in a bullish channel, staying above the 30-SMA with the RSI above 50. 

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However, bears challenged the bullish trend when the price broke below the channel support. Moreover, the price has retested the level which has held firm as resistance. The last step to confirm a reversal to the downside would be a break below the 150 support level to make a lower low. If this happens, bears will target the 148.50 support level.

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