JPY Strengthens Amid BoJ Tightening, USD Faces Headwinds
The Japanese Yen (JPY) exerted downward pressure on the US Dollar (USD) during the early European session. Despite the USD's initial attempt to recover value following yesterday's decline, the JPY continued to strengthen due to rising expectations that the Bank of Japan (BoJ) may implement further monetary policy tightening.
The BoJ recently raised its short-term rate target by 15 basis points (bps), adjusting it to a range of 0.15%-0.25%. Additionally, the central bank announced plans to reduce its monthly purchases of Japanese government bonds (JGBs) to ¥3 trillion, starting in the first quarter of 2026. These moves have bolstered the JPY, adding to its momentum against the USD.
Meanwhile, the upside potential for the USD/JPY pair appears limited as the USD encounters significant headwinds. Expectations are growing for a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September. The CME FedWatch tool indicates a 74.5% probability of this rate cut at the September meeting, a sharp increase from the 11.4% chance reported just a week ago.
From a technical perspective, incorporating our Supply and Demand analysis, we missed the initial entry in the Supply area due to a rapid spike that reached our entry point. Nonetheless, we are monitoring for a potential retest of that area for a possible short position.
USD/JPY Chart
✅ Please share your thoughts about Japanese Yen Futures in the comments section below and HIT LIKE if you appreciate my analysis. Don't forget to FOLLOW ME; you will help us a lot with this small contribution.
The BoJ recently raised its short-term rate target by 15 basis points (bps), adjusting it to a range of 0.15%-0.25%. Additionally, the central bank announced plans to reduce its monthly purchases of Japanese government bonds (JGBs) to ¥3 trillion, starting in the first quarter of 2026. These moves have bolstered the JPY, adding to its momentum against the USD.
Meanwhile, the upside potential for the USD/JPY pair appears limited as the USD encounters significant headwinds. Expectations are growing for a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September. The CME FedWatch tool indicates a 74.5% probability of this rate cut at the September meeting, a sharp increase from the 11.4% chance reported just a week ago.
From a technical perspective, incorporating our Supply and Demand analysis, we missed the initial entry in the Supply area due to a rapid spike that reached our entry point. Nonetheless, we are monitoring for a potential retest of that area for a possible short position.
USD/JPY Chart
✅ Please share your thoughts about Japanese Yen Futures in the comments section below and HIT LIKE if you appreciate my analysis. Don't forget to FOLLOW ME; you will help us a lot with this small contribution.
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