The USD/JPY pair has attracted some selling interest just below the key 153.00 level, leading to a minor pullback. However, the potential for a deeper decline seems limited as underlying demand for the US Dollar remains robust amid hawkish Federal Reserve policies and relative economic strength in the United States.
Despite this latest dip, support for the US Dollar remains firm given expectations of higher-for-longer interest rates, as indicated by recent comments from Federal Reserve officials. The yen, conversely, continues to face pressure due to the Bank of Japan’s dovish stance, as Japan’s central bank remains committed to its ultra-low interest rate policy to spur economic growth. This policy divergence between the Fed and the BoJ has kept USD/JPY on a strong uptrend.
Market participants are watching key levels closely, with 152.50 emerging as potential support for the pair in the near term. Any downside movement is likely to be capped by strong buying interest at lower levels, given the persistent interest rate differential between the two countries. Unless there is a shift in policy from the BoJ or a significant softening in US economic data, USD/JPY’s downside risks appear constrained, with further upside possible if the USD gains additional momentum.
