Key Events:
- FOMC minutes confirm rate hold expectations and ongoing inflation concerns
- USDJPY drops to December 2024 lows as Japanese 10Y government bond yields surge to 16-year highs
- EURUSD holds above 1.04 ahead of key economic data
- Upcoming Events: Flash PMI indicators for Japan, the Eurozone, the UK, and the US
USDJPY Drops to December 2024 Lows
Following its peak in January 2025 at 158.88, USDJPY has retreated nearly 800 points, as the Yen regains momentum with support from the Bank of Japan (BOJ) and broader economic stability. The US Dollar Index is currently holding above the 106 level, reflecting market indecision amid Trump tariff risks, inflation concerns, and expectations of a Federal Reserve rate hold.
On the other hand, the Japanese Yen is showing stronger confidence as BOJ rate hike expectations grow. The 10-year Japanese government bond yield has hit its highest level since 2009, aligning with economic forecasts and the outlook for gradual rate hikes.
Source: Trading Economics
EURUSD Holds Above 1.04 Ahead of Flash PMIs
The Flash Manufacturing and Services PMI indicators, scheduled for release on Friday, are keeping EURUSD steady above 1.04. These indicators often trigger significant market volatility, particularly for a pair struggling to break above 1.0520 and continue the uptrend established from its January 2025 low.
Uncertainty around Trump administration policies, inflation concerns, and broader economic risks is limiting further upside potential for EURUSD. However, positive growth indicators could reinforce the current trend.
Technical Analysis: Quantifying Uncertainties
USDJPY Forecast: 3-Day Time Frame – Log Scale
Source: TradingView
USDJPY has dropped to 150, retesting December 2024 lows, as 10-year Japanese government bond yields reach 16-year highs amid BOJ rate hike optimism.
- The 149.50 level serves as a key support, aligning with the midpoint of a long-respected price channel that has guided USDJPY movements between 2023 and 2025.
- A clear close below 149.50 could extend the drop toward 147, aligning with the 0.618 Fibonacci retracement level of the uptrend from September 2024 (139.58) to January 2025 (158.88).
- The next major support level aligns with the 0.786 Fibonacci retracement, the lower channel boundary, and 143.60.
EURUSD Forecast: 3-Day Time Frame – Log Scale
Source: TradingView
EURUSD remains below the mid-channel zone and the 1.0520 resistance level. Market indecision is evident, particularly given the US Dollar Index’s current stance.
A clean close above 1.0520 could trigger rallies toward 1.0620, 1.07, and 1.0850, aligning with the upper channel boundary (established between July 2023 and February 2025).
On the downside, a break below 1.0330 could prompt a deeper retracement toward 1.02, and in extreme cases, 1.0170, parity (1.0000), or even 0.99.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
You Tube: Commodities and Forex Trading with Razan Hilal
