Japanese Yen Forecast: Bearish Signs Build; Setups on USD/JPY, EUR/JPY, GBP/JPY

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JAPANESE YEN OUTLOOK – USD/JPY, EUR/JPY, GBP/JPY

  • The yen (JPY) weakens across the board following dovish comments from a key Bank of Japan official.
  • Indications that the BoJ will not hike aggressively when it exits negative rates should be bearish for the Japanese currency
  • This article discusses the near-term technical outlook for three yen pairs: USD/JPY, EUR/JPY and GBP/JPY

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The Japanese yen (JPY) weakened across the board on Thursday following cautious remarks by Bank of Japan’s Executive Director Seiichi Shimizu. Addressing the lower house budget committee in parliament, Mr. Shimizu indicated that the BoJ would maintain an accommodative stance for an extended period, even after abandoning negative borrowing costs, which have been in place since 2016.

The dovish statements suggest that the BoJ’s exit from its ultra-loose position will not likely result in multiple rate hikes, as seen in other key economies recently, but rather only a few scattered ones. In theory, this could limit the yen’s recovery potential in the coming months, making it less attractive in terms of its yield differential versus its major peers.

Leaving fundamental analysis aside for now, the remainder of this article will focus on the technical outlook for three important Japanese yen pairs: USD/JPY, EUR/JPY and GBP/JPY. We’ll also assess key price thresholds that should be on every currency trader’s radar, discussing their potential roles as support or resistance levels in the upcoming trading sessions.

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USD/JPY FORECAST – TECHNICAL ANALYSIS

USD/JPY rallied strongly on Thursday, breaking above a key ceiling at 148.90 and reaching its best mark since November last year. If upward momentum continues in the coming days, resistance looms near the psychological 150.00 level. On further strength, all eyes will be on the 152.00 area.

On the flip side, if sellers return unexpectedly and spark a pullback, 148.90 should be the first line of defense against a bearish attack. Further losses beyond this technical floor could draw attention first to 147.40, and then to 146.00 if weakness persists for long.

USD/JPY TECHNICAL CHART

USD/JPY Chart Created Using TradingView

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Change in Longs Shorts OI
Daily 2% 3% 3%
Weekly 6% 11% 10%

EUR/JPY FORECAST – TECHNICAL ANALYSIS

EUR/JPY soared on Thursday, breaching short-term trendline resistance at 160.00 and approaching another key barrier stretching from 161.15 to 161.75. Bears must fiercely defend this ceiling; a failure to do so could trigger a rally toward last year’s highs near the 164.00 handle.

In the event of a bearish reversal, support emerges at 159.70. Below this point, the 100-day simple moving average becomes the next potential technical floor for the market, succeeded by the 50-day simple moving average at 158.30. Further down, the focus shifts to 157.50.

EUR/JPY TECHNICAL CHART

A screen shot of a graph  Description automatically generated

EUR/JPY Chart Created Using TradingView

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GBP/JPY FORECAST – TECHNICAL ANALYSIS

After a moderate pullback in late January, GBP/JPY has mounted a strong comeback in recent days, steadily approaching its multi-year highs set around 189.00. Bulls are likely to encounter stiff resistance around these levels, yet a breakout could propel the pair towards 190.50.

On the other hand, if the bullish impetus fades and prices turn lower, initial support is positioned at 185.50. While GBP/JPY may stabilize upon testing this region ahead of a possible rebound, a breakdown could prompt a retracement towards 184.20, close to the 100-day and 50-day simple moving averages.

GBP/JPY TECHNICAL CHART

A screen shot of a graph  Description automatically generated

GBP/JPY Chart Created Using TradingView





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