03.06.202518:27 Forex Analysis & Reviews: USD/JPY. Analysis and Forecast

The USD/JPY pair is showing mixed dynamics: despite the general recovery of the US dollar, the Japanese yen is under pressure from intraday sellers amid a combination of negative factors.

Investors expect the Bank of Japan to continue the gradual normalization of its monetary policy, supported by statements from Bank of Japan Governor Kazuo Ueda, which strengthens dollar bulls and limits the yen's growth. At the same time, the Federal Reserve's forecasts of rate cuts in 2025 provide fundamental support for the yen. An additional factor supporting the Far Eastern currency is geopolitical risks associated with the protracted conflict in Ukraine and trade tensions, which increase demand for the yen as a safe-haven asset.

However, calls for the Bank of Japan to slow the winding down of its bond-buying program after 2026 reflect the challenges of reversing large-scale stimulus measures, restraining yen bulls from active buying. Moreover, the modest rebound of the dollar from multi-week lows supports demand for the dollar in the USD/JPY pair. Overall, the divergence in monetary policy expectations between the Bank of Japan and the Fed creates a balance of forces that limits significant growth in the USD/JPY pair, requiring traders to exercise caution when opening positions. From a technical perspective, the decline below the 200-day SMA was seen as a trigger for bears. However, sustained strength above the 144.00 level could lift spot prices toward the key resistance at 144.50. On the other hand, weakness below the psychological level of 143.00 would make prices vulnerable to further decline toward 142.40, followed by last week's low and the round figure of 142.00. Yet, as long as oscillators on the daily and 4-hour charts remain in negative territory, the path of least resistance for the pair remains to the downside.