USD/JPY Outlook: Yen Slides as BoJ Cuts Growth Outlook

  • The USD/JPY outlook has turned bullish as the yen loses ground.
  • The dollar rebounded on Thursday, as global trade tensions eased.
  • US data in the previous session revealed a slowdown in the economy.

The USD/JPY outlook has turned bullish as the yen loses ground after the Bank of Japan downgraded its outlook for growth. Meanwhile, the dollar rebounded amid hopes for more trade deals, especially with China. However, data from the previous session suggested a weakening US economy and a likely Fed rate cut in June.

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The Bank of Japan kept interest rates unchanged on Thursday as widely expected. However, the yen fell after the central bank cut its outlook for growth in Japan. The downgrade comes amid concerns that Trump’s tariffs will hurt the global economy. As a result, market participants expect only 10-bps of hikes this year, compared to 16-bps before the meeting. 

Elsewhere, the dollar rebounded on Thursday, as global trade tensions eased. Trump stated that the US may soon sign trade agreements with India, South Korea, and Japan. At the same time, he noted progress with China. The comments boosted hopes for an end to the trade war with China, which would brighten the outlook for both economies. 

However, US data in the previous session revealed a slowdown in the economy. The GDP unexpectedly contracted by 0.3%. Meanwhile, private employment came in below estimates, pointing to weak demand for labor in April. Finally, inflation remained unchanged, contrary to economists’ expectations of a 0.1% increase. Weaker growth and softer inflation will pressure the Fed to cut interest rates.

USD/JPY key events today

  • US unemployment claims
  • US ISM manufacturing PMI

USD/JPY technical outlook: Bulls take charge after trendline break

USD/JPY technical outlookUSD/JPY technical outlook
USD/JPY 4-hour chart

On the technical side, the USD/JPY price is poised to break above the 144.02 resistance level, confirming a new bullish trend. It trades above the 30-SMA with the RSI near the overbought region, suggesting solid bullish momentum. 

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The price recently broke above its bearish trendline and pulled back to retest it after meeting the 144.02 resistance level. After the retest, bulls regained momentum, pushing the price above the 30-SMA and challenging the 144.02 level. 

A break above this level will make a higher high, confirming a bullish trend. Moreover, it will clear the path for USD/JPY to retest the 148.01 resistance level. If it does not break above the resistance level, the price may consolidate before making another attempt.

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