USD/JPY: Yen Breaks All Major SMAs to the Downside as Rally Picks Up Speed. Now What?

Japanese currency closed out its fourth straight week of gains as its American rival washed out 4.6% during that time.

🏆 Two-Month High for the Yen

• The USDJPY pair slipped to a two-month low of ¥151.30 Monday morning, logging the fourth straight week of declines on Friday. The Japanese yen could finally be turning a corner, but there’s a lot to unpack before that speculative conclusion holds true.
• Japan’s currency has a few things going for it. It broke all the major simple moving averages — 50, 100, 200 — and is nearing a double bottom at ¥148.80.

📊 More Rate Hikes Coming?

• Officials from the Bank of Japan are increasingly in favor of more interest rate hikes as inflation is starting to weigh on consumer spending. Higher rates typically benefit the local currency as they give it more power in international trade. Also, consumer deposits get a better yield.
• Bank of Japan’s Naoki Tamura said last week policymakers need to bump up interest rates to 1% in the latter half of fiscal 2025 to fend off rising prices.

💲 Dollar and the Week Ahead

• But there’s also the US dollar in that equation. And it should be dropping if the yen is to rise. Stateside, President Trump is all about tariffs and has vowed to slap reciprocal tariffs on “everyone” sometime today or tomorrow. Tariffs are a powerful way to boost domestic business activity and potentially strengthen the local currency.
• A few major events will help set the tone this week. The dollar-yen is in for a shakeup with the release of the US inflation report on Wednesday. Fed chief Jay Powell will testify on the same day — get ready for volatility and some trading opportunities.