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USD/JPY Retains Bullish Momentum with CPI-Driven Breakout in Sight
Economic
Summary:
USD/JPY trades steadily near 145.30 ahead of crucial U.S. CPI data, with traders eyeing its implications for Fed policy.
Buy
PENDINGUSDJPY
EXP
145.800
Entry Price
150.000
TP
143.500
SL
144.416 +0.395 +0.27%
--
Point
PENDING
143.500
SL
CLOSING
145.800
Entry Price
150.000
TP
The USD/JPY pair held steady around the 145.00 mark during the European session on Wednesday, as global markets turned their attention to a critical U.S. inflation report that could significantly shape the Federal Reserve's monetary policy outlook heading into the second half of the year.
The currency pair has oscillated within a narrow intraday range—hovering around 145.30 at the time of writing—demonstrating traders' caution ahead of the release of May’s U.S. Consumer Price Index (CPI) data, due at 12:30 GMT. The greenback itself has remained muted, with the U.S. Dollar Index (DXY) fluctuating near the psychologically significant 99.00 level.
Market participants are anticipating the inflation print not only for clues on future Fed policy moves but also to assess whether the broader effects of the Trump administration’s newly enacted economic measures—particularly tariff hikes—are beginning to filter into consumer prices. The headline CPI is projected to rise 2.5% year-on-year in May, modestly higher than the 2.3% recorded in April. Core CPI, which strips out food and energy prices, is forecast to tick up to 2.9% from April’s 2.8%.
This uptick, if confirmed, could reinforce concerns that domestic price pressures are firming as a result of tariffs imposed by Washington, with importers likely to pass on the costs to end consumers. In that scenario, the Federal Reserve may have to delay rate cuts or even adopt a more hawkish stance should inflation show signs of persistently overshooting the central bank’s 2% target.
"The Fed has made it clear that it needs more confidence in disinflation before loosening policy," said Emily Wang, FX strategist at Deutsche Bank. "If today’s CPI comes in hotter than expected, we could see USD/JPY extend its rally beyond 146."
On the Japanese front, expectations remain anchored to a cautious Bank of Japan. Despite the BoJ's historic pivot away from negative interest rates earlier this year, a June 2–10 Reuters survey showed that a slim majority of economists still expect the central bank to maintain its policy rate at 0.5% through year-end. Most now anticipate the next rate hike to occur in early 2026, not this year.
This divergence in policy trajectories between the Fed and the BoJ continues to favor a stronger dollar against the yen, especially as Tokyo remains deeply concerned about domestic growth fragility and the potential deflationary impact of a premature tightening cycle.
Elsewhere, geopolitical risks have marginally eased after a two-day summit in London between U.S. and Chinese trade officials, which produced a tentative framework for continued dialogue. U.S. Commerce Secretary Howard Lutnick said he was optimistic that Beijing would soon reverse its export curbs on rare earth materials—a positive sign that both economies are attempting to stabilize relations after months of heightened tensions.
This slight reduction in geopolitical tension, coupled with subdued yen demand as a traditional safe haven, has also helped underpin the USD/JPY’s upward bias.
Technical Analysis
From a technical standpoint, USD/JPY appears poised for further upside in the near term. The pair has broken decisively above a short-term descending trendline and continues to trade above the 50-day Exponential Moving Average (EMA50), maintaining a constructive technical posture. Relative Strength Index (RSI) readings have exited oversold territory and now flash fresh bullish signals.
Currently trading around 145.33, USD/JPY has established a solid foothold above the key pivot level at 144.93. If the pair sustains this level, bulls could set their sights on the next resistance target at 146.33. A break beyond that could expose the 150.00 region—a level not seen since late 2022.
Still, a short-term pullback toward the pivot zone is plausible, especially if CPI figures offer an underwhelming surprise. However, unless the price drops back below 144.50, the broader bullish structure remains intact.
TRADE RECOMMENDATION
BUY USDJPY
ENTRY PRICE: 145.80
STOP LOSS: 143.50
TAKE PROFIT: 150.00
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