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USD/JPY Outlook: Dollar Yen Jumps on Hawkish Fed & Rising Yields

USD/JPY Outlook: Dollar Yen Jumps on Hawkish Fed & Rising Yields

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US Dollar/ Japanese Yen (USD/JPY) Price Outlook:

  • USD/JPY rises to above 135.00 after Fed officials push for higher rates.
  • US Dollar Index (DXY) erases 2023 losses, pushing prices above 104.00 against a basket of foreign currencies.
  • Japanese Yen (JPY) faces fresh fundamental and technical headwinds after USD breaks higher ahead of a long weekend in the United States.
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USD/JPY Rises to Fresh High as Fed Officials Push for Higher Rates

USD/JPY has risen to its highest level in two months after more hawkish chatter from Fed official boosted demand for the higher-yielding Dollar.

With January’s PPI (producer price inflation) data highlighting the necessity for higher rates, persistently high levels of inflation have placed pressure on the Federal Reserve to raise rates further, driving USD/JPY higher.

As officials of the Federal Reserve continued to reiterate their commitment to tame price pressures through restrictive monetary policy, a compelling case for another 50 basis-point rate hike at the March FOMC has supported Dollar/Yen strength.


Source: Refinitiv

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While the repricing of rate expectations has allowed the US Dollar index (DXY) to erase the current year’s losses, the resurgence of Dollar strength has weighed on the major currency pair, driving prices to a fresh 2023 high at 135.116.

Although Tuesday’s nomination of Kazuo Ueda as a potential successor to the current BoJ (Bank of Japan) Governor Haruhiko Kuroda provided a slight reprieve for the Japanese Yen, losses were limited after the pair fell to another zone of technical support at 131.500.

USD/JPY Daily Chart

Chart  Description automatically generated

Chart prepared by Tammy Da Costa using TradingView

USD/JPY Technical Analysis

With USD/JPY rebounding above the 61.8% Fibonacci of the 2020 – 2022 move at 132.554, the pair has continued to trade higher, pushing price action above the prior January high at current support of 134.774.

On the daily chart below, the formation of the death cross on the daily chart has supported the bearish move, drawing attention to another zone of technical support at 131.500.

If prices continue to hold above this level and remain above the psychological level of 133.00, the probability for higher rates could continue to drive Dollar Yen strength.

USD/JPY Price Levels

134.00 (Psychological level)135.116 (Current daily high)
132.554 (Fibonacci support)136.00 (Psych level)
131.994 (50-day MA)136.918 (200-day MA)

--- Written by Tammy Da Costa, Analyst for

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.