USD/JPY Price Forecast - Dollar to Yen Powers Toward ¥150.00 After Strong U.S. Data and BoJ Inflation Miss

USD/JPY Pushes Toward 150.00 as Fed Easing Bets Unwind

USD/JPY surged into Friday’s European session, trading as high as ¥149.96 before easing to ¥149.52 by 17:00 GMT, marking a weekly gain of 1.3%. The move was powered by a sharp reduction in expectations for aggressive Federal Reserve rate cuts after a combination of stronger-than-expected U.S. macroeconomic releases. Second-quarter GDP was revised up to 3.8% from 3.2%, while weekly jobless claims fell to 218,000, the lowest since July, countering fears of a softening labor market. The dollar index simultaneously climbed to 97.85 before easing back to 97.50, underlining broad greenback strength that lifted USD/JPY from its early-September lows of 146.90.

Tokyo CPI Miss Adds Pressure on the Yen

The Japanese yen’s weakness was exacerbated by softer-than-expected inflation data in Tokyo, where September headline CPI slowed to 2.5% year-on-year from 2.6% in August. The core measure held at 2.5% rather than accelerating to 2.6% as economists had forecast. Markets immediately trimmed the probability of an October Bank of Japan rate hike from 50% to just 35%. The moderation in Japan’s inflation gives policymakers at the BoJ further cover to maintain ultra-accommodative policy, reinforcing the divergence between U.S. and Japanese yields. The move has pushed the yen to its weakest level in eight weeks, with USD/JPY now retesting levels last seen on August 1, when the pair briefly reached 150.00.

Fed Cut Repricing Tightens Link Between Rates and USD/JPY

Correlation studies show USD/JPY tracking short-end U.S. yields and Fed funds futures with a coefficient near -0.94 over the past two weeks, a near-lockstep relationship. Futures markets now discount fewer than 50 basis points of additional easing in 2025, compared to nearly 100 basis points just a month earlier. This repricing, tied closely to resilient consumer spending and income growth in the U.S., has made USD/JPY extremely sensitive to U.S. data surprises. Traders note that while the Fed’s preferred inflation measure—the PCE deflator—rarely shocks, today’s release of spending and income details could prove more consequential for expectations and price action in USD/JPY.

Technical Levels: Resistance at 151.00, Support Near 149.00

USD/JPY’s technical picture has turned decisively bullish. The pair has broken above its 200-day moving average for the first time since June, now holding support near the ¥149.00 level. Momentum gauges confirm the strength of the move: the 14-day RSI is trending higher, and MACD remains firmly in positive territory. Bulls are eyeing resistance at ¥151.00, the October 2022 swing high, and further at ¥152.40, a level tested in late 2023. On the downside, any slip below ¥149.00 could expose the 20-day moving average near ¥148.25, while deeper pullbacks might target ¥147.50 where demand has previously emerged. Still, with Japan’s inflation losing steam and U.S. data consistently surprising to the upside, the bias remains skewed to the upside for now.

Market Sentiment and Trading Flows

Institutional accounts in Tokyo and New York have been adding to long USD/JPY positions on the break above 149.00, according to traders familiar with the flows. Options markets have shown heavy demand for 150.00 strike calls expiring next week, indicating positioning for a breakout. Meanwhile, volatility remains subdued, with one-month implied vol hovering at 9.2%, well below levels seen during past interventions by Japanese authorities. This signals that while risk of official action exists if USD/JPY sustains above 150.00, the market is not yet pricing imminent intervention.

Verdict: Bullish Bias with Near-Term Caution

Given the dovish backdrop in Tokyo, the resilience of U.S. growth, and the repricing of Fed cuts, USD/JPY remains tilted toward further upside. Support at ¥149.00 is critical, and as long as the pair holds above it, the path toward ¥151.00 appears open. Short-term traders should remain alert around today’s U.S. PCE data and subsequent Fed speakers, but the balance of risks suggests dips are likely to be bought. The current structure supports a Buy rating on USD/JPY with targets at ¥151.00 and ¥152.40, while acknowledging the risk of verbal or direct intervention should yen weakness accelerate beyond policymakers’ comfort zone.

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