USD/JPY Price Forecast: Pair at ¥155.97 as Scorching 0.8% Core PPI Collides With BoJ Tightening

SD/JPY Price Forecast: Pair Holds 155.97 as Scorching 0.8% Core PPI Collides With BoJ Tightening Cycle — DXY Ascending Triangle at 97.94 Resistance Holds the Key to ¥160

USD/JPY trades at ¥155.97 on Friday, down 0.157% on the session and locked in a tug-of-war that perfectly encapsulates the two most important macro forces in global FX right now: a Federal Reserve that refuses to cut rates while inflation runs hot, and a Bank of Japan that has definitively ended its decades-long experiment with ultra-accommodative policy. The pair sits 4 yen below the ¥160 level that has functioned as a hard ceiling defended by Japanese authorities twice in 2024 — the second defense triggered a 2,000+ pip reversal. Sentiment is 62% bullish according to retail positioning data. The Elliott Wave structure on the weekly chart identifies an ascending fifth wave of larger degree with a target of ¥160-¥162, but the critical pivot at ¥153.90 must hold. The January PPI data that printed Friday — 0.5% headline, 0.8% core against 0.3% consensus — should be dollar-positive but was met with a yen rally, creating precisely the kind of paradox that defines currency markets at inflection points.

The DXY ascending triangle at 97.94 resistance has been tested on three consecutive days and five of the past seven without breaking. That failure to resolve higher despite persistent effort creates a coiled spring: the breakout, when it comes, will be violent in either direction. If DXY clears 97.94, USD/JPY is the primary beneficiary among the majors and the path to ¥160 opens. If DXY breaks the 97.33-97.46 support instead, EUR/USD and GBP/USD become the momentum trades and USD/JPY retreats toward ¥153.90 and potentially ¥152.20. The next seven days will resolve one of the most consequential technical patterns in FX.

The DXY Ascending Triangle at 97.94 — Why USD/JPY's Fate Depends on the Dollar Index

The Dollar Index sits at 97.60, trapped inside an ascending triangle with resistance at 97.94 and rising trendline support at 97.33-97.46. The 97.94 level has extraordinary technical significance — it set the lows last April, served as support in October and December, and has now held the highs through early February and the past two weeks. Buyers have tested it relentlessly and failed every time. The 10-year U.S. Treasury yield has dropped below 4% to 3.978% for the first time since November, which should be dollar-negative, yet DXY hasn't broken support either. Higher-lows continue to form, keeping the bullish structure alive.

The gold market provides a template for how this resolves. Gold built an identical ascending triangle last week, broke out cleanly to start this week, and ran straight to the next resistance at $5,238. Currency triangles resolve more slowly than commodities, but the mechanics are the same: compression builds energy, and the breakout carries momentum proportional to the duration of the consolidation. This DXY triangle has been building for two weeks. The resulting move — up through 97.94 toward 98.31 and 98.61, or down through 97.33 toward 96.80 — will define the direction of every major pair for March.

USD/JPY Is the Primary Vehicle for Dollar Strength

If the DXY triangle resolves higher, USD/JPY is the cleanest expression of that move among the majors. EUR/USD is building a falling wedge with higher-lows above the 1.1748 Fibonacci level — a formation that leans toward bullish reversal, not continuation lower. GBP/USD has an even weaker bearish structure, with resistance at 1.3568 holding but the bullish case less compelling than EUR/USD. USD/CAD faces its own technical standoff at 1.3727 resistance with support being tested. Among these four majors, USD/JPY has the most developed uptrend and the clearest institutional flow pattern supporting continued dollar-yen strength. The carry trade dynamic, Japanese corporate hedging flows around fiscal year-end in March, and the BoJ's cautious normalization pace all favor the long side — if the dollar cooperates.

January PPI — 0.8% Core Print That Should Have Sent USD/JPY to ¥157

The January Producer Price Index released Friday was unambiguously inflationary. The headline reading of 0.5% month-over-month nearly doubled the 0.3% consensus. Core PPI — excluding food and energy — printed at 0.8%, almost triple the 0.3% expectation. This is the kind of data that kills rate cut expectations and sends the dollar screaming higher. The Fed is already holding at 3.50%-3.75% with a 97.9% probability of no change through March and April. A 0.8% core PPI adds reinforcement to an already hawkish rates backdrop.

Yet USD/JPY fell on the print. The 10-year Treasury yield declined further below 4% rather than bouncing. The DXY dropped 0.2% on the session. The paradox has a straightforward explanation: the bond market is more afraid of recession than inflation. A scorching PPI combined with a "low-hire, low-fire" labor market (jobless claims at 212,000, up 4,000) suggests stagflationary forces — rising prices without corresponding economic acceleration. In that environment, higher PPI doesn't strengthen the dollar because it doesn't increase the probability of rate hikes; it increases the probability of an economic slowdown that eventually forces cuts regardless of where inflation sits.

For USD/JPY specifically, the PPI paradox matters because it weakens the rate differential argument that has been the primary driver of yen weakness over the past three years. If U.S. rates plateau and the BoJ continues hiking — even gradually — the interest rate gap compresses from both sides. The 375 basis point Fed Funds rate versus the BoJ's newly-positive policy rate (roughly 0.50% after consecutive hikes) still represents a massive differential, but the direction of change is what moves currencies. And the direction is converging.

Bank of Japan's Tightening Cycle — The Structural Force Underneath Every USD/JPY Trade

The Bank of Japan's policy trajectory has fundamentally changed. After decades of negative interest rates, yield curve control, and unlimited stimulus, Governor Kazuo Ueda has moved the BoJ into a genuine tightening cycle. The negative interest rate policy is over. The yield cap on 10-year JGBs has been progressively relaxed. Japanese inflation has sustained above the BoJ's 2% target for multiple consecutive quarters — something that hasn't happened since the 1990s. Corporate inflation expectations, measured by the Tankan survey, are rising. The spring Shunto wage negotiations are expected to deliver meaningful wage growth for the second consecutive year.

This isn't a one-off adjustment — it's a regime change. The implications for USD/JPY are profound. The classic carry trade — borrowing in cheap yen to invest in higher-yielding dollar assets — is losing its foundational pillar. As BoJ rates rise, the cost of yen borrowing increases, narrowing the return spread. Japanese institutional investors holding trillions in foreign assets face improving domestic returns and reduced hedging costs, creating incentive for capital repatriation flows that strengthen the yen. The BoJ joins the Fed, ECB, and BoE in withdrawing global liquidity, a synchronized tightening that removes the excess monetary stimulus that inflated all asset prices over the past decade.

Prime Minister Takaichi's Political Influence on BoJ Policy

Japanese Prime Minister Sanae Takaichi's recent speech reignited yen selling and pushed USD/JPY higher as markets interpreted her remarks as pressure on the BoJ to slow its normalization. The interplay between the government and central bank is a critical variable. Takaichi's political incentives favor a weaker yen — it boosts export competitiveness and inflates nominal GDP figures — but the BoJ's mandate is price stability, and inflation above target demands tighter policy regardless of political preferences. Governor Ueda has repeatedly emphasized a data-dependent approach, and the data currently supports continued normalization. The tension between Takaichi's rhetoric and the BoJ's actions creates short-term volatility (the "slump after Takaichi's speech" followed by "yen gains on hawkish BoJ") but the medium-term trajectory is clear: higher Japanese rates mean a structurally stronger yen than what prevailed during the NIRP era.

The ¥160 Ceiling — Why Japanese Authorities Won't Let USD/JPY Through Without a Fight

The ¥160 level is the most significant line in the sand in global FX. The Japanese Finance Ministry defended it twice in 2024, and the second intervention triggered a reversal exceeding 2,000 pips. The level hasn't traded since July 2024 — sellers have consistently appeared before price can reach it, creating a series of lower highs on the longer-term charts that signal increasing caution among USD/JPY longs.

The market's institutional memory of those interventions is doing the Finance Ministry's work for it. Nobody wants to be the last long caught above ¥160 when the BoJ dumps reserves into the market to defend the yen. This creates a natural gravitational pull that decelerates bullish momentum above ¥158 and makes it progressively more difficult to push through. Even if the DXY ascending triangle breaks higher and the carry trade reasserts itself, the approach to ¥160 will be grinding rather than explosive, with stops getting run and positions getting tested at every yen-round level. The asymmetry is poor: the upside from ¥156 to ¥162 is 600 pips with intervention risk, while the downside from ¥156 to ¥148 is 800 pips if risk sentiment collapses and the yen's safe-haven bid activates.

USD/JPY Elliott Wave Structure — ¥160-¥162 Target With ¥153.90 as the Critical Pivot

The weekly chart identifies an ascending fifth wave of larger degree (5) in development, with wave (1) of 5 forming as its component. On the daily timeframe, the third wave 3 of (1) has completed and a correction finished as wave 4 of (1). The fifth wave 5 of (1) has begun developing on the four-hour chart, with wave i of 5 unfolding within. If this count is correct, USD/JPY continues rising toward ¥160.00-¥162.00.

The critical level is ¥153.90. A daily close below it invalidates the bullish Elliott Wave count and opens decline targets of ¥152.20 and then ¥147.80 — a potential 800-pip drop from current price. This pivot level also aligns with the support zone between ¥151.95 and ¥152.50 that has been well-defended on multiple tests. The shorter-term support at ¥154.45-¥155.00 is the first line of defense for bulls on any pullback, while the ¥152.80 level (approximately the 20-day EMA) provides an intermediate support test before the ¥153.90 pivot becomes critical.

Technical Indicators Confirm Bullish Bias With Caution

The RSI at 58 indicates bullish momentum without overbought conditions — the reading sits in the "constructive" zone that supports continuation rather than reversal. The MACD shows positive histogram readings above the signal line. Price trades in the upper half of the Bollinger Bands, suggesting continued upward pressure. These indicators collectively support the Elliott Wave bullish count as long as the ¥153.90 pivot holds. The 20-day EMA near ¥152.80 functions as dynamic support, the 50-day SMA at ¥151.25 confirms the medium-term uptrend, and the 200-day SMA at ¥148.90 defines the long-term trend direction. All three moving averages are below price and rising — a clean bullish alignment.

Key USD/JPY Levels for March Positioning

Resistance: ¥155.97 (current price) → ¥156.00 (round number) → ¥157.00 → ¥158.00 → ¥160.00 (intervention ceiling, Elliott Wave target zone start) → ¥162.00 (Elliott Wave upper target and major resistance).

Support: ¥155.00-¥154.45 (short-term defended zone) → ¥153.90 (Elliott Wave critical pivot — lose this, lose the bull case) → ¥152.80 (20-day EMA) → ¥152.50-¥151.95 (major institutional support zone) → ¥151.25 (50-day SMA) → ¥148.90 (200-day SMA) → ¥147.80 (Elliott Wave bearish target).

The Verdict — USD/JPY Is a Buy on Dips to ¥154.45-¥155.00 With a Hard Stop Below ¥153.90

The weight of evidence favors a cautious bullish position in USD/JPY. The Elliott Wave count targets ¥160-¥162. The DXY ascending triangle retains bullish potential despite repeated failures at 97.94. The RSI at 58, positive MACD, and all moving averages aligned below price confirm upward momentum. Institutional positioning via CFTC data shows net long USD/JPY exposure. Japanese fiscal year-end repatriation flows in March create a potential headwind, but the carry trade differential of 325+ basis points between Fed Funds and BoJ rates still incentivizes yen selling. The 0.8% core PPI reinforces the "higher for longer" U.S. rate narrative, even if the immediate market reaction was counterintuitive.

The risks are substantial and clearly defined. The ¥160 intervention ceiling creates asymmetric risk-reward above ¥158. The BoJ's tightening cycle is compressing rate differentials from the yen side. Takaichi's political interference adds noise. The hot PPI paradox — dollar weakness on inflationary data — may signal a regime shift in how markets price U.S. rate expectations. And if the DXY ascending triangle breaks down rather than up, USD/JPY loses its primary tailwind.

Buy USD/JPY on pullbacks to the ¥154.45-¥155.00 support zone. Place stops below ¥153.90 — the Elliott Wave pivot that defines the entire bullish structure. If that level breaks, the count invalidates and the target shifts from ¥160+ to ¥152.20 and potentially ¥147.80. The first profit target is ¥157.00, with a scale-out at ¥158.50 to reduce exposure ahead of the ¥160 intervention zone. Only add above ¥158 if the DXY has confirmed a breakout above 97.94 and institutional flow data shows accelerating yen selling — without those confirmations, the risk of a ¥160 reversal is too high to justify full position size. The March BoJ meeting and U.S. CPI data will provide the next major catalysts. Until then, the trend is up, the structure is intact, and dips are for buying — but the ceiling is low and getting lower.

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