- USD/JPY regains positive traction on Friday and is supported by a combination of factors.
- Hawkish Fed expectations help revive the USD demand and offer support to the major.
- The Fed-BoJ policy divergence and a positive risk tone undermine the safe-haven JPY.
- Traders now eye the US PCE data for some impetus ahead of Fed Chair Powell’s speech.
The USD/JPY pair attracts fresh buying on Friday and climbs back to the 137.00 mark during the early European session, reversing the previous day's losses.
The US dollar builds on the overnight bounce from the weekly low and gains some traction on the last day of the week, which, in turn, is seen lending some support to the USD/JPY pair. Firming expectations that the Fed will tighten its policy further to tame inflation continues to underpin the buck. The bets were reaffirmed by upbeat US macro data and hawkish remarks by Fed officials on Thursday.
In fact, St. Louis Fed chief James Bullard stressed the need to keep raising interest rates. Adding to this, Kansas City Fed President Esther George said the Fed hasn’t yet raised rates to levels that weigh on the economy and may have to take them above 4% for a time. Policymakers, however, reserved their judgment on the size of the rate increase at the next FOMC policy meeting in September.
Nevertheless, the markets are still pricing in a greater chance of a supersized 75 bps rate hike. In contrast, the Bank of Japan is expected to retain its ultra-easy policy stance, marking a big divergence in comparison to a more hawkish Fed. This, along with a generally positive tone around the equity markets, undermines the safe-haven Japanese yen and contributes to the USD/JPY pair's move up.
The fundamental backdrop supports prospects for a further near-term appreciating move. That said, bulls might refrain from placing aggressive bets and prefer to wait for a more hawkish message from Fed Chair Jerome Powell at the Jackson Hole Symposium. Ahead of the key event risk, traders might take cues from the release of the US PCE data, due later during the early North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays pressured near 1.1350 on USD rebound
EUR/USD trades in negative territory at around 1.1350 on Friday. Renewed US Dollar strength on growing optimism surrounding the US-China trade war de-escalation keeps the pair undermined. Trade talks and US data remain in focus.
GBP/USD consolidates losses near 1.3300 after UK Retail Sales data
GBP/USD remains under moderate selling pressure near 1.3300 despite the upbeat UK Retail Sales data for March. The pair feels the heat of the solid US Dollar rebound, aided by a Bloomberg report, which indicated China may suspend its 125% tariff on select US imports.
Gold drops below $3,300 as market mood improves
Gold turns south following Thursday's rebound and trades below $3,300 on Friday. The move down comes amid growing optimism about a de-escalation of the US-China trade conflict after US President Trump hinted at the beginning of negotiations.
Ethereum: Accumulation addresses grab 1.11 million ETH as bullish momentum rises
Ethereum saw a 1% decline on Friday as sellers dominated exchange activity in the past 24 hours. Despite the recent selling, increased inflows into accumulation addresses and declining net taker volume show a gradual return of bullish momentum.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.