Bias: Range-bound, as USDJPY sits above its 90-day average and near the upper end of the 3-month range, but policy signals are mixed due to diverging central bank paths.
Key drivers:
- Rate gap: The Fed is expected to ease gradually toward a neutral stance this year, while the BoJ has signaled further tightening if inflation persists, creating near-term balance.
- Oil/risk: Oil remains at 90-day highs with extra volatility, and higher energy costs weigh on the yen, supporting the USDJPY move when risk appetite is firm. That dynamic links to global growth and commodity markets, which can swing the pair in choppy fashion.
- Macro: BoJ inflation trends keep the door open for further policy tightening into 2026.
Range: expect a drift toward the upper end of the recent range, with occasional tests of the highs, aided by steady risk conditions and commodity cues.
What could change it:
- Upside risk: The Fed signals fewer rate cuts or higher rates for longer, lifting the dollar.
- Downside risk: A yen-supportive intervention or a BoJ pivot that strengthens the yen shifts the pair lower.
