USD/JPY Price Forecast - USDJPY drops into 154s as soft US GDP clashes with firm PCE

Macro shock resets USD/JPY direction

USD/JPY spent the week in a noisy range, slipping into the 154s after the US Q4 GDP print slowed to 1.4% while core PCE ran near 3% year-on-year. That mix hit the dollar’s growth story without easing inflation risk, so rate-cut hopes were pushed out, not reinforced. The pair faded from the mid-155s toward the 154 handle as dollar longs trimmed after the data and legal headlines hit at the same time, breaking the clean, yield-only narrative that had started to return.

Tariff ruling, new 10% levy and dollar risk premium

The US Supreme Court’s rejection of the earlier reciprocal tariff framework removed a piece of the prior “policy premium” some had baked into the dollar. At the same time, President Donald Trump signed a broad 10% tariff on imports, arguing it will help plug the fiscal gap. Markets are not convinced. Revenue math is uncertain, refund risk on earlier IEEPA tariffs lingers, and the probability of further court challenges remains high. The result is simple: more policy uncertainty and more term-premium risk at the long end of the Treasury curve, exactly when USD/JPY was trying to trade cleanly off rate differentials again.

Rates, correlations and the unstable USD/JPY regime

Correlation work over the last week shows USD/JPY re-aligned with US–Japan two-year and ten-year yield spreads and tracking Nasdaq futures more tightly, a classic “rates plus risk” regime. Extend the window to one month or a quarter and that neat picture breaks down. The pair has flipped between regimes repeatedly, with the relationship to yield spreads only recently turning positive again and the prior dominance of Japan’s 2s30s curve fading. That curve, which drove price after the Japanese election, has swung to a strongly negative correlation as US factors reclaimed control. The message is clear: the last week’s clean macro link may not last, so any strategy that assumes a stable, one-factor USD/JPY model is exposed.

Fed backlash: soft GDP, firm PCE and 53 bp of cuts

The Q4 GDP miss at 1.4% undermines the “US exceptionalism” growth story, but the PCE profile does not justify aggressive easing. Core PCE running around 3% year-on-year forces the Federal Reserve to keep optionality. Futures now price roughly 53 basis points of cuts this year, down from earlier expectations, with the curve pushing the easing cycle further out. That combination keeps front-end yields elevated, supports the dollar on dips, but also injects volatility into USD/JPY whenever data whipsaws the curve. Next key data: PPI and PCE components that feed straight into core PCE, plus a heavy roster of Fed speakers including Waller and Bowman, who have previously shifted the entire curve with a paragraph.

BOJ messaging, Tokyo CPI and the 2% problem

On the Japanese side, the macro story is about how far the Bank of Japan can move without choking growth. The market will parse comments from Takada, the most hawkish board member, and from Himino early next week. Tokyo CPI for February is expected to show the core gauge (excluding fresh food) at roughly 1.7% year-on-year, below target, dragged lower by energy and subsidy effects. A downside surprise would undercut the case for near-term normalization, weaken the yen and support USD/JPY rebounds. An upside surprise, especially if the re-acceleration versus January is clear, would revive bets on a March or April move and could push USD/JPY decisively back through the mid-154s.

Global dollar tone: DXY holds gains despite soft growth

The dollar is not collapsing. The DXY sits just under 98 with an almost 1% gain on the week, even after the GDP disappointment. Daily heat maps show the greenback strongest versus the Swiss franc and mixed against others, while USD/JPY has backed off highs toward 155.10–154.50 rather than staging a full reversal. The narrative is “less strong dollar” rather than “weak dollar”: soft growth but sticky inflation and a Fed that will not rush to cut. That matters for USD/JPY because it caps downside as long as US yields hold their levels, yet it leaves the pair vulnerable each time a US data miss hits rate-cut pricing.

Risk sentiment, equities and the yen’s dual role

Equity risk has started to wobble. Nvidia’s upcoming Q4 report is a high-beta event, given how much AI capex and mega-cap valuations drive global risk appetite. A negative surprise could hit Nasdaq futures hard, break the fragile improvement in risk sentiment, and trigger carry unwinds across FX. For USD/JPY that cuts both ways. Worsening risk appetite tends to favour the yen through deleveraging of carry positions, but any spike in US yields from fiscal or inflation worries would cushion USD downside. Add the Iran deadline issued by Trump, and you have classic event risk: a shallow escalation that only lifts crude likely supports the dollar versus the yen; a severe shock that hits global risk would likely send USD/JPY sharply lower via panic positioning.

Cross-FX signals: AUD strength and yen underperformance

Outside USD/JPY, the cross-section confirms that the yen is still treated as the funding leg when risk is calm. AUD/USD trades near 0.7080–0.7086, above its 20-day moving average at 0.7034, eyeing resistance at 0.7100 and the yearly high around 0.7147. The weekly performance table shows the Australian dollar up roughly 1.70% against the yen, one of the strongest moves on the board. At the same time, intraday USD heat maps show the dollar modestly stronger versus JPY and CHF while weaker versus high beta. That tells you positioning: markets are still comfortable short JPY against pro-cyclical currencies, but are far more tactical on USD longs. For USD/JPY, that means downside spikes will come from JPY short squeezes, not from a structural re-rating of the yen yet.

Event calendar: where USD/JPY volatility clusters next

Short term, the volatility clusters are obvious. On the US side: factory orders, housing data, consumer confidence, jobless claims, Chicago PMI, and especially the PPI print that feeds into core PCE. On the Japanese side: BOJ speeches and Tokyo CPI. Globally: speeches from Lagarde and other G10 central bankers, plus New Zealand retail sales and Australian CPI. Each of these can steer rate differentials at the two-year and ten-year tenors, which remain the primary anchors for USD/JPY. Watch the London fix and the US cash equity open around these releases: liquidity pockets there tend to exaggerate moves, with algos leaning on the obvious levels at 154.00, 155.00, and 156.00.

Technical structure: coiling under 156 with key bands

Technically, USD/JPY is coiling under a clear resistance band. Price bounced off the strong 152.00 support region, which aligns with horizontal demand and the uptrend from the April post-rout lows, then pushed back through 154.45. The pair now trades below a major cap around 156.00, close to the 50-day moving average, with the February highs above 157.50 marking the line that would fully invalidate the current sideways-to-lower bias. Price action shows a sequence of higher lows and lower highs, forming a tightening triangle. Trendlines have few touches, so they are a guide, not something to trade blindly, but they fit the idea of compression before a break. Momentum tools agree on indecision: RSI around mid-range and MACD flat, while a recent daily doji at the top of the range confirms the market’s hesitation.

Levels, scenarios and near-term skew for USD/JPY

Near-term support sits first around 154.00, where some of the latest dip buying emerged, then near 153.50 and 153.00 where stops likely cluster. Below 152.00 the structure changes: the medium-term uptrend from last April is damaged, and the market would start to talk about a broader shift rather than a correction. On the topside, 155.00 and 155.50 mark tactical sell zones, and 156.00–156.20 is the key line in the sand. A clean break and daily close above 156.00 opens a path back toward 157.50; failure there keeps the range trade alive. Given the softer US growth, lingering inflation and renewed tariff uncertainty, directional risk is still tilted sideways to lower rather than to a fresh breakout.

Macro verdict on USD/JPY: stance and bias

Putting the macro and technical picture together: US growth at 1.4% with core PCE near 3%, a Fed priced for about 53 bp of cuts, a Supreme Court ruling that clouds tariff strategy, a new 10% blanket import tariff that raises fiscal questions, BOJ core inflation still below 2% but not collapsing, BOJ hawks lining up into Tokyo CPI, and a pair that cannot yet clear 156.00 despite a strong DXY week. That mix argues against chasing USD/JPY higher at current levels. Bias is mildly bearish for USD/JPY over the coming weeks. The stance is Sell-on-rallies into the 155.50–156.00 band with clear invalidation above 157.50, and respect for the 152.00 floor as the medium-term pivot. As long as core PCE stays firm but growth underwhelms and legal and tariff noise keeps term premium unstable, sharp swings are likely, but the risk profile favours gradual yen recovery rather than a fresh USD/JPY melt-up.

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