USD/JPY Price Forecast - Dollar to Yen Soars to 149.75 as Dollar Strengthens on U.S. Growth, Yen Braces for Tokyo CPI

USD/JPY Extends Rally Toward 149.75 on Surging U.S. Data and Weak Yen Backdrop

The USD/JPY pair has climbed to 149.75, its highest in seven weeks, up 0.55% on the session as traders respond to a string of stronger-than-expected U.S. economic releases. The move extends a two-day rally powered by upward GDP revisions, resilient labor market data, and surging durable goods orders, giving the U.S. Dollar another leg higher against the Japanese Yen. Q2 GDP was revised to 3.8% from 3.3%, well above expectations, underscoring consumer spending strength and a sharp drop in imports. Weekly jobless claims fell to 218,000, compared to forecasts of 235,000, while August durable goods orders jumped 2.9% after a July decline of 2.7%. These readings cut expectations for an October Fed rate cut to 85% from 94% just days earlier, reinforcing the Dollar’s yield advantage over the Yen.

Technical Outlook: USD/JPY Eyes Breakout Above 149 Resistance

The pair’s rally has brought it directly into the 148.84–149.23 resistance corridor, a zone marked by the 61.8% retracement of the August decline and the yearly moving average. A sustained break above this level would confirm a larger structural shift and open the door toward 150.88–151.63, where April extensions and 2023 highs converge. Short-term support lies at 147.05, with deeper defenses at 146.10–146.70, a region aligned with the 38.2% retracement of the April rally and the multi-year slope line from 2021. A close below this pivot would invalidate the broader advance, exposing 143.67–144.10. For now, bulls remain in control, and the weekly close relative to 149 will be decisive in determining whether momentum carries toward the 151 handle.

Japanese Policy and Inflation Risk for the Yen

On the Japanese side, Bank of Japan minutes revealed policymakers reaffirming the 0.5% overnight call rate target while continuing gradual JGB tapering. Officials noted core CPI running 3.0–3.5%, with sticky services inflation driven by rising labor costs. A few members suggested readiness to discuss eventual rate hikes if inflation persists, though the overall stance remains ultra-accommodative. Tokyo CPI due Friday will be closely monitored for confirmation of entrenched price pressures. A hotter reading could revive chatter of earlier BoJ tightening, though for now the divergence with Fed policy remains stark, keeping pressure on the Yen.

Macro Drivers: Fed Caution, Rate Differentials, and PCE on Deck

The divergence between a Fed still cautious on rate cuts and a BoJ reluctant to normalize is keeping the spread in favor of the Dollar. Core PCE, the Fed’s preferred inflation gauge, is due tomorrow and could set the tone for October policy expectations. Any upside surprise above the 2.6% annualized pace could further erode bets on near-term easing, reinforcing the Dollar’s bid and lifting USD/JPY through 149.23 toward 150+. Conversely, softer PCE could offer temporary relief to the Yen, especially if coupled with strong Tokyo CPI.

Momentum, Positioning, and Market Psychology

Positioning data shows heavy speculative bias toward Dollar longs, amplifying the risk of sharp pullbacks on disappointment. The rally has broken back through inverted hammer and doji patterns from earlier this week, confirming buyers remain firmly in control. The consolidation zone between 146 and 149 that dominated August and September now acts as a launchpad. If bulls absorb selling near 149 and hold above, the technical path favors acceleration toward 151. Should exhaustion emerge here, however, the 200-day EMA near mid-range could re-anchor trading.

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