24.03.202514:20 Forex Analysis & Reviews: USD/JPY. Analysis and Forecast

At the start of the week, following the release of a weaker Japanese PMI, the yen came under pressure. This, combined with news of narrower and less aggressive retaliatory tariffs from U.S. President Donald Trump, has boosted investor confidence and reduced demand for the yen as a safe haven. However, expectations that the Bank of Japan will continue to raise interest rates are capping deeper losses for the currency.

According to preliminary estimates, the Au Jibun Bank Manufacturing PMI in Japan fell from 49.0 to 48.3 in March, marking the lowest reading since March 2024 and a nine-month low. It also highlights a decline in the services sector, which contracted for the first time in five months. These data weigh on the yen.

Nevertheless, there are factors supporting the yen and preventing deeper losses—such as BoJ Governor Kazuo Ueda reaffirming the central bank's readiness to adjust its easing policy if inflation reaches the target level. Deputy Governor Shinichi Uchida also stated that the Bank will closely monitor economic and price developments. This signals that the BoJ will act in accordance with economic conditions.

Meanwhile, the Federal Reserve raised its inflation forecast but maintained its outlook for two 25-basis-point rate cuts by year-end. This limits the U.S. dollar's recovery and caps USD/JPY movement near the psychological level of 150.00.

For better trading opportunities today, attention should be paid to the release of U.S. business activity indices and speeches from FOMC members, which may provide additional momentum for USD/JPY. However, the market's primary focus will be on Friday's releases of the Tokyo Consumer Price Index and the U.S. Core PCE Price Index.

From a technical perspective, USD/JPY bulls need to break above the 200-period Simple Moving Average (SMA) on the 4-hour chart, which lies just above the psychological level of 150.00. If this level is breached, spot prices may rise toward the 151.00 round figure and then to the monthly high near 151.30.

However, considering that oscillators on the daily chart have yet to show positive momentum, the Asian session low around 149.33 is currently acting as immediate support ahead of the 149.00 round number. A drop below this level could trigger a break of the 148.60 area, opening the door to deeper losses, with an accelerated decline toward last week's swing low around 148.20 and eventually toward the 148.00 round level, or potentially lower.