USD/JPY Outlook:
Bearish, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Federal Reserve has held interest rates steady, while the Bank of Japan has recently raised its benchmark rate, benefiting the JPY.
• Risk/commodities: Oil prices are currently elevated, which can strengthen the JPY as Japan imports most of its oil, making it sensitive to oil price fluctuations.
• One macro factor: Geopolitical tensions and rumors of U.S. intervention in currency markets have pressured the USD, contributing to its decline.
Range:
Expect the USD/JPY to drift within the recent range, potentially testing its lower extremes.
What could change it:
• Upside risk: A surprising improvement in U.S. jobless claims could bolster the USD.
• Downside risk: Continued geopolitical tensions or further indications of Japanese government intervention could weaken the USD against the JPY.
