Market Insights > Daily Market Analysis

5 August 2025,03:19

Daily Market Analysis

Yen Steadies as BoJ Dovishness Clashes with Wage Growth

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5 August 2025, 03:19

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Key Takeaways:

*BoJ expected to hold, but wage-led inflation keeps hike risks alive.

*Trade calm with the U.S. eases safe-haven demand, limiting JPY upside.

*The BoJ tone is likely cautious, but CPI revision may stir policy shift bets.

Market Summary:

The Japanese Yen remained on the defensive near the 147 level against the U.S. Dollar, retracing part of last week’s sharp rebound that followed a weaker-than-expected U.S. jobs report. While Friday’s labor data fueled Fed rate-cut speculation and gave the Yen temporary support, underlying fundamentals continue to favor a cautious outlook for JPY. The Bank of Japan (BoJ) remains firmly committed to its ultra-loose policy stance, even as domestic wage pressures rise.

Governor Kazuo Ueda has reiterated the BoJ’s data-dependent approach but stopped short of signaling any timeline for policy normalization. Despite an upward revision in the FY2024 core CPI forecast to 2.7%, policymakers remain concerned about the fragile nature of Japan’s domestic demand and supply-side inflation. Notably, a record 6% minimum wage hike for FY2025 could help support household income and inflation, but its impact on near-term policy remains uncertain.

Meanwhile, U.S. Dollar dynamics are adding complexity. The greenback has come under pressure in recent sessions as investors brace for Thursday’s release of the Fed’s preferred inflation metric—core PCE. Deteriorating U.S. macro data and heightened political scrutiny around statistical credibility have eroded confidence in the Fed’s policy narrative. Still, with U.S. Treasury yields holding firm and long-end rates remaining elevated, the Yen’s ability to stage a meaningful comeback is constrained.

In the near term, USD/JPY is expected to remain rangebound between 147 and 150, with modest Yen strength possible if U.S. inflation data disappoints or the BoJ minutes (due Tuesday) show a firmer policy bias. However, sustained appreciation in the Yen will likely require either a decisive dovish Fed pivot or a clear signal from the BoJ toward tightening—both of which remain elusive.

Technical Analysis

USDJPY, H4:

USD/JPY continues to face downside pressure, currently trading near 146.90 after extending its decline from the recent 151.15 peak. The pair has broken below key moving averages, reflecting a shift in short-term momentum. Price action has now slipped beneath the 147.00–146.90 support zone, with bears targeting the next critical support at 146.10 which is a level that coincides with the July breakout area and may serve as a decision point for further direction.

Momentum indicators reinforce the bearish bias. The Relative Strength Index (RSI) has fallen to 34, hovering just above oversold territory, while showing little sign of reversal. The MACD remains negative, with both the MACD line and signal line diverging further below the zero line. Bearish histogram bars continue to build, signaling sustained downside momentum. Volume has remained elevated during this sell-off phase, suggesting continued conviction behind the decline.

Overall, the technical outlook remains tilted to the downside, with price action and trend signals pointing toward continued weakness. While a short-term rebound cannot be ruled out, the lack of bullish divergence or volume exhaustion suggests sellers remain in control unless a strong reversal pattern emerges.

Resistance Levels: 148.90, 151.15

Support Levels: 145.85, 144.10

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Disclaimer

This content is for educational and informational purposes only and should not be considered investment advice, a personal recommendation, or an offer to buy or sell any financial instruments.

This material has been prepared without considering any individual investment objectives, financial situations. Any references to past performance of a financial instrument, index, or investment product are not indicative of future results.

PU Prime makes no representation as to the accuracy or completeness of this content and accepts no liability for any loss or damage arising from reliance on the information provided. Trading involves risk, and you should carefully consider your investment objectives and risk tolerance before making any trading decisions. Never invest more than you can afford to lose.

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