USD/JPY Price Forecast: From 157 Peak to 152 Support as BoJ Hawk Turn Threatens Carry Trade

USD/JPY – from 157 peak to 152 zone: regime change or deep pullback?

USD/JPY – what the last two weeks really priced in

USD/JPY has flipped from a one-way dollar carry trade to a crowded exit door. The pair has dropped from just under ¥157 at the start of February to roughly ¥152–153, a weekly fall of about 2.9% and the sharpest slide since late-2024. That move is not a random correction; it reflects a structural repricing of Japan risk, a softer US rate path and a serious wobble in carry positioning. The yen has moved to the top of the G10 performance table, and the price action – a large weekly bearish reversal that swallows several prior weeks – signals that sellers are finally dictating terms. The question now is whether the recent low-150s print is a pause inside a new down-leg towards 145, or the start of a choppy sideways range where carry buyers try to re-enter on every bounce.

USD/JPY – BoJ spring hike risk and the shrinking rate gap

The core macro driver behind the yen’s comeback is the shift at the Bank of Japan. For the first time in years, a spring rate hike is a live scenario, not a theoretical discussion. Markets see April as a realistic lift-off window as wage negotiations and inflation dynamics move closer to the BoJ’s comfort zone. Japanese 10-year government bond yields recently pushed up to around 2.38% before easing, a multi-decade high that forced investors to rethink how far negative real yields can stay in place. The crucial piece is the rate differential story: at the same time as Japanese yields nudge higher, US markets are leaning toward roughly three quarter-point cuts from the Federal Reserve over 2026, with June, September and December now the core scenario. That combination – BoJ stepping away from ultra-loose policy while the Fed edges toward easing – narrows the right-hand side of the carry equation that drove USD/JPY beyond 155 and towards 160. When the spread compresses, leveraged yen shorts become harder to justify, and we are seeing that unwind in real time.

USD/JPY – fiscal reset, JGB curve and why the yen suddenly looks ‘quality’ again

Politics has amplified the monetary shift. Prime Minister Sanae Takaichi’s landslide win gives the government a supermajority and reduces fears of uncontrolled fiscal expansion. Before the vote, the market priced in heavier issuance of Japanese government bonds and demanded a higher risk premium, steepening parts of the curve. After the result, 10-year yields retreated from their highs and the 2s–30s curve behaviour changed, signalling improved confidence in Japan’s fiscal path. Correlation work on the market side shows USD/JPY tracking that shift closely: over the last week the pair has shown an extremely high short-term correlation with the shape of Japan’s 2s–30s JGB curve, near 0.9 on a five-day basis and strengthening on a twenty-day window as well. The message is simple: as fears about Japan’s debt dynamics and issuance fade, the yen regains its status as a credible reserve and funding currency. Investors who spent years treating the yen purely as a cheap funding leg for US equities and credit are now being forced to respect Japanese macro again – and that means a stronger currency over the medium term.

USD/JPY – Fed cuts, US data and how far the dollar side can really fall

On the dollar leg, the macro story has softened but not collapsed. US headline CPI has eased toward roughly 2.4% year-on-year, and energy is now a drag on the inflation basket rather than a driver: gasoline prices are down around 7–8% versus a year earlier, with January’s CPI data showing a 3.2% monthly fall in pump prices and a 7.5% annual drop. That pattern feeds into the Fed’s preferred Core PCE gauge, where markets expect a 0.4% month-on-month print after 0.2% previously. Retail sales for the latest month disappointed, showing flat growth against expectations for a 0.4% rise, and that has nudged some investors toward a more dovish view for 2026. At the same time, labour remains firm: non-farm payrolls beat expectations, the unemployment rate edged down from about 4.4% to 4.3%, and wage growth ticked slightly higher. That mix explains the choppy dollar tape: macro data is soft enough to support the rate-cut story but still strong enough to cap how aggressively the Fed can ease. For USD/JPY, that means the US side is mildly negative, not in free-fall. The index of broad dollar performance has printed a bearish weekly candle with a lower close but still sits inside a wider consolidation, so yen strength – not dollar collapse – is doing most of the work in the current move.

USD/JPY – carry trade stress, equities and volatility links you cannot ignore

The real structural risk now is not a calendar data point; it is the positioning that built up while USD/JPY marched higher. The pair became one of the signature carry trades in global macro: borrow yen near zero, buy higher-yielding dollar assets, and earn the spread. That trade looks much less comfortable when Japan edges toward positive rates, Japanese bonds offer real yield again, and risk assets wobble. Recent correlation work shows USD/JPY trading almost as a proxy for global risk: over the last week the pair’s correlation to Nasdaq futures has sat around 0.8, while its relationship with VIX futures – a volatility gauge – is roughly –0.9. That means yen strength now comes hand-in-hand with equity stress and volatility spikes. The August 2024 episode, when a weaker-than-expected US payroll print triggered a ten-big-figure drop in USD/JPY, remains the reference point; current price action is not yet at that scale but is rhyming with it. When equity leaders like US tech, crypto and even gold roll over together, and when previously one-directional carry trades start to lose money, the risk of a disorderly unwind increases sharply. In that environment, even modest macro surprises can trigger outsized FX moves as leveraged positions are forcibly cut.

USD/JPY – the event calendar that matters for the next leg

With so much positioning at stake, the upcoming calendar is crucial for both legs of USD/JPY. In Japan, preliminary Q4 GDP is expected to show a 0.4% quarter-on-quarter rebound after a 0.6% contraction in Q3. If that recovery comes with solid private consumption and firm external demand, it will validate the BoJ’s more confident tone and harden expectations for an April rate hike. Trade data are forecast to show exports up in the low-double-digit range year-on-year, a clear acceleration from around 5% previously; that kind of external engine would support corporate profits, wage hikes and demand-driven inflation. Later in the week, nationwide CPI is expected to show headline inflation easing slightly below 2% but core-core inflation (excluding fresh food and energy) still in the high-2% area, comfortably above the BoJ’s target. A profile of softer headline but sticky underlying inflation is exactly what allows the central bank to argue for normalisation. On the US side, the FOMC minutes will reveal how much weight the Fed is putting on still-elevated inflation versus slightly softer growth, and Friday’s data pack – Core PCE, Q4 GDP revisions and flash PMIs – will refine June cut probabilities. A hotter-than-expected core PCE and firm services PMI print would push cuts further out and give the dollar some support; weaker inflation and softer activity would do the opposite. On top of that, a key Supreme Court ruling on reciprocal tariffs could reshape longer-dated US yields: a decision that undermines tariff collection could steepen the curve and pressure the dollar, while a ruling that preserves the status quo would remove one potential bearish trigger. All of these items hit a market with crowded positions and fragile sentiment, which amplifies their impact on USD/JPY.

USD/JPY – technical map around 152, 150 and 145

Technically, the structure has shifted from clean uptrend to vulnerable plateau. On the weekly chart, last week’s candle is a large bearish reversal that engulfs the real bodies of at least two prior bullish weeks, a classic sign that sellers have taken control after an extended run. Momentum indicators on the daily frame back that up: RSI is rolling lower from overbought territory and MACD remains in a bearish configuration, favouring selling strength rather than buying dips. The price zone around ¥152 has emerged as the immediate battleground. The pair bounced from just above 152.10, a prior swing low, and sits close to an ascending trendline that connects the major lows from 2025, currently near ¥151.6. This cluster – trendline, prior low, and the neighbourhood of the 200-day moving average – is the first real line of defence for dollar bulls. Above spot, the last two daily candles stalled around ¥153.5, creating a near-term resistance band; further up, the broken support region near ¥154.4 is the next ceiling where late longs are likely to exit. On the downside, a clean daily and then weekly close below the 151.5–152.0 area would be a strong signal that the multi-month bullish trend is breaking, opening room towards ¥150, where psychological support and prior congestion sit. Beyond that, the 146.5 low from October and the 145 handle become credible medium-term targets, especially given that several institutional houses now place 12-month fair value around 145 with some clustering of forecasts in the high-140s. At the top of the range, the 158–160 band is still the intervention danger zone, given past Ministry of Finance action when the pair traded in that region. That overhang caps how far rallies are likely to run, even if a sharp short-covering squeeze emerges.

USD/JPY – 4–8 week scenario: path towards 150 with violent counter-rallies

Putting macro, positioning and technicals together, the medium-term picture for USD/JPY tilts bearish. The core narrative is narrowing rate differentials as BoJ normalisation collides with eventual Fed easing, layered on top of a broad re-evaluation of Japan as a destination for capital rather than just a funding source. Japanese data in the coming weeks – GDP, exports, wage trends and core inflation – are more likely to confirm that story than to reverse it. On the US side, even if some prints surprise on the upside, the broader trend is one of inflation converging toward target with growth decelerating from an unsustainably strong Q3. That backdrop erodes the dollar’s yield advantage over time. For the next four to eight weeks, the most coherent baseline is a drifting lower USD/JPY with frequent, sharp counter-trend rallies driven by position squeezes and equity swings. A typical pattern would be bounces into the mid-153s or low-154s that fail and roll back over toward 150 as data reinforce the narrowing-spread theme. A decisive weekly break below 150 would then open a glide path towards the mid-140s over the subsequent quarter, consistent with the more bearish institutional projections that see 145 as a fair 12-month anchor. Upside risk to this view would come from three sources: a surprisingly weak run of Japanese data that pushes the BoJ to delay hikes past mid-year, a re-acceleration of US growth and inflation that forces the Fed to price out cuts, or a strong risk-on rally that re-ignites demand for yen-funded carry trades into equities, credit and crypto. Even under those scenarios, however, the political and bond-market backdrop in Japan makes another sustained march to fresh highs above 160 harder to justify without a genuinely new shock.

USD/JPY – trading stance now: buy, sell or hold?

On balance, the data and structure argue against treating USD/JPY as a dip-buying story now. The pair is not yet in full capitulation, but the combination of a bearish weekly reversal, heavy positioning, improving Japanese fundamentals and narrowing rate spreads points to rallies being opportunities to sell rather than fresh buying windows. The stance here is clear: bias is bearish USD, bullish JPY over the next one to three months, with a tactical preference to sell strength into the 153.5–154.5 region targeting 150 first and then the mid-140s on a multi-month horizon. That corresponds to a Sell rating on USD/JPY at current levels, not a Hold, with invalidation only on a sustained daily close back above the 50-day average and a weekly push through the 158 region that would signal the carry trade has fully re-asserted itself. Until that happens, the path of least resistance is for the pair to grind lower, punctuated by violent squeezes, as the market slowly adjusts from the old regime of free yen funding to a new landscape where Japan’s currency and bond market finally matter again.

That's TradingNEWS