Japanese Yen exchange rate forecast for the week of May 19-25: Downward pressure still exists with USD/JPY

USD/JPY under pressure from mixed outlook between Fed and BoJ

Last week, the USD/JPY pair continued its downtrend, from the 148.65 zone, the highest since early April, to a new low for the week.

The decline came despite Japan’s weaker-than-expected first-quarter GDP, which showed growing confidence that the Bank of Japan (BoJ) will continue its rate hike path in 2025. This hawkish expectation has provided significant support for the yen, especially as the dollar has lost momentum.

Preliminary GDP data showed that Japan’s economy contracted 0.2% in the first quarter, but markets did not react negatively, and the yen was supported by comments from the BoJ. Many members of the policy board believe that the BoJ still has room to raise interest rates if the global trade environment stabilizes, especially after trade talks with the US progressed positively.

USD Weakens on Poor US Data, JPY Benefits

On the US side, the latest data has reinforced expectations that the Federal Reserve (Fed) may have to cut interest rates sooner. The producer price index (PPI) fell sharply in April, while retail sales rose only 0.1%, showing clear signs of weakening consumer spending. This increases the possibility that US economic growth will slow in the coming quarters, creating conditions for the Fed to ease policy. The USD therefore continued to depreciate, putting downward pressure on the USD/JPY pair.

However, the safe-haven sentiment towards the Japanese yen is still limited partly by optimistic expectations that US-China trade tensions will continue to cool, which could reduce the flow of money to safe-haven assets such as the JPY in the short term.

USD/JPY Forecast: Downside Risks Continue to Prevail

Moving into the week of May 19-25, the technical outlook shows that the USD/JPY pair is still at risk of falling further if it fails to hold key support levels.

Currently, the price has broken through the 38.2% Fibonacci retracement level of the recent recovery, a sign that sellers are in control of the trend.

If the pair breaks the psychological level of 145 USD/JPY, the next target will be the strong support zone at 144.55 USD/JPY corresponding to the 200-period SMA on the 4-hour chart. If it continues to break the 144.30 USD/JPY level (Fibo level 50%), USD/JPY could extend the downtrend to lower regions, establishing a new corrective cycle.

On the upside, the 145.7 USD/JPY area is a short-term resistance, followed by 146 USD/JPY. However, any recovery attempt will likely be viewed as a selling opportunity unless the pair can break above 146.6 (23.6% Fibonacci level). A short-term technical recovery could then take USD/JPY to 147 and beyond to the 147.7 – 148 USD/JPY area.

Japanese Yen May Continue to Gain Slightly If BoJ Maintains Hawkish Stance

In the current environment, the USD/JPY pair remains bearish, with the yen supported by expectations of a rate hike from the BoJ and a weaker dollar on the prospect of a Fed rate cut.

This week, developments in the US consumer sentiment index and inflation expectations will be the factors to watch to determine whether the USD/JPY decline will be reinforced.

Overall, barring a surprise policy reversal from the BoJ or the Fed, the yen is likely to continue to strengthen against the USD in the short term.

Source: https://baonghean.vn/du-bao-ty-gia-yen-nhat-tuan-tu-19-den-25-5-ap-luc-giam-gia-van-hien-huu-voi-usd-jpy-10297609.html