USD/JPY: Analysts Adjust Forecasts for the Strengthening of the Yen

Since the beginning of 2024, the USD/JPY price has been in an uptrend (as shown by the blue channel), but when the rate exceeded the psychological level of 150 yen per US dollar, market sentiment changed. This was due to expectations that the Bank of Japan would take interest rates out of negative territory — and statements from officials gave clear indications of this possibility.

Expecting a tightening of monetary policy, the yen sharply strengthened against the dollar, and a bearish A→B impulse formed on the USD/JPY chart. However, having reached the level of 147 yen per US dollar (and dropped slightly below it), the market has stabilized. Moreover, we see some recovery: today, the USD/JPY price is trading around 147.8.

From a fundamental analysis point of view, analysts believe that the strength of the US economy should not be underestimated. And if the Bank of Japan raises rates, it will not be in an aggressive manner. Bloomberg writes that Nomura Securities Co., Mizuho Bank Ltd. and Citigroup Global Markets Japan Inc. have adjusted their forecasts for the yen in recent weeks. On average, they forecast the rate to be around 140 yen per US dollar at the end of this year. HSBC Holdings Plc, in turn, expects the yen to end the year at 136 against the US dollar.

From the point of view of technical analysis of USD/JPY, the current recovery may be due to the influence of support from the lower border of the ascending channel.

Thus, traders can assume that the recovery will end (for example, rising to approximately 148.6 — 50% of the A→B momentum), with the bears attempting to resume the downward trend with a new assault on the lower channel boundary. If it turns out to be successful, this will open the way for the price to reach the levels indicated in analysts' forecasts.

Information from the Bank of Japan will be key. Its interest rate decision is scheduled for Tuesday, March 19.