09.07.202511:23 Forex Analysis & Reviews: USD/JPY. Analysis and Forecast

On Wednesday, the Japanese yen extended its decline for the third consecutive day, pushing the USD/JPY pair to a new two-week high above the key 147.00 level during the Asian session. The pressure on the yen is driven by concerns over the economic consequences of the 25% tariffs announced by U.S. President Donald Trump, now set to take effect on August 1, which affect Japanese goods. In addition, expectations that trade tensions will force the Bank of Japan to abandon plans to raise interest rates this year are also prompting capital outflows from the yen amid ongoing domestic political uncertainty.

Japanese Prime Minister Shigeru Ishiba stated on Tuesday that bilateral negotiations will continue with the goal of reaching a mutually beneficial trade agreement.

Meanwhile, escalating trade tensions are compounding problems for the Japanese economy, which contracted in the first quarter due to weak consumer spending, putting further pressure on the yen.

Recent media polls suggest that the Liberal Democratic Party (LDP) and its junior coalition partner Komeito may fail to secure a majority in the House of Councillors election on July 20. This could complicate trade negotiations and increase fiscal and political risks in Japan, adding to the yen's downward pressure.

Additionally, the strengthening of the U.S. dollar—supported by expectations that higher tariffs will drive inflation and compel the Federal Reserve to maintain elevated interest rates—also contributes to the upward momentum of USD/JPY.

However, dollar bulls are currently proceeding with caution, preferring to wait for new signals regarding the Fed's interest rate policy. According to the CME Group's FedWatch tool, markets are currently pricing in about 50 basis points of rate cuts by the end of the year, starting in October.

Today, traders should pay attention to the release of the FOMC meeting minutes during the U.S. session for potential trading opportunities. Any new signals regarding future Fed rate cuts could significantly impact dollar dynamics and provide fresh momentum for the USD/JPY pair.

From a technical standpoint, the USD/JPY pair closing above the 100-day Simple Moving Average (SMA) for the first time since February signals bullish intent. Oscillators on the daily chart remain in positive territory, though not yet in overbought zones, supporting the potential for further short-term growth toward intermediate resistance around 147.45–147.60, and possibly to the 148.00 level or the June high.

On the other hand, support lies at the Asian session low of 146.50, which currently limits immediate declines. Any downward correction is likely to be seen as a buying opportunity and may remain limited near the 100-day SMA breakout level, just below 146.00. A break below this level would shift the short-term trend in favor of the bears and could lead to deeper losses for the pair.