USD/JPY Price Forecast: Extends winning streak and stabilizes above 20-day EMA
- USD/JPY extends its advance to near 158.60 due to the US Dollar’s continued outperformance.
- Positive outcomes of the Trump-Xi meeting have strengthened the US Dollar.
- The Fed is unlikely to cut interest rates this year.
The USD/JPY pair extends its winning streak for the fifth trading day on Friday, trading 0.11% higher to near 158.60 during the early European trading session. The pair extends its advance as the US Dollar (USD) outperforms due to signs of improving trade relations between the United States (US) and China, and firm speculation that the Federal Reserve (Fed) will not cut interest rates this year.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% higher to near 99.10, the highest level seen in over two weeks.
Earlier in the day, US President Donald Trump said that he had struck “fantastic trade deals” with Chinese President Xi Jinping as he wrapped up his Beijing visit on Friday, Reuters reports.
After the Trump-Xi meeting, a White House official also said, “Two sides discussed expanding market access for American businesses into China and increasing Chinese investment.”
Meanwhile, traders have priced out the possibility of a Federal Reserve (Fed) interest rate cut for the year, as inflationary pressures have accelerated due to higher energy prices.
USD/JPY technical analysis
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In the four-hour chart, USD/JPY trades higher at around 158.57. The pair holds above the 20-period exponential moving average (EMA) at 157.87 and sits directly on the 61.8% Fibonacci retracement at 158.57, keeping the near-term bias bullish while that pivot holds.
The Relative Strength Index (14) at 77 suggests overbought conditions, hinting that upside momentum is stretched even as price action remains supported by the underlying trend structure.
On the topside, initial resistance is aligned at the 78.6% Fibonacci retracement at 159.52, with a further barrier at the 100% retracement near 160.74. On the downside, immediate support emerges at the 50% retracement at 157.90, reinforced by the 20-period EMA at 157.87, while deeper pullbacks would look toward the 38.2% level at 157.23 ahead of 156.40 and the swing low zone around 155.06.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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