Despite a temporary bounce, the broader backdrop remains bearish for USDJPY. With U.S. yields softening as markets price in over 50bps of Fed cuts this year, the rate differential between the U.S. and Japan continues to narrow. 

At the same time, energy prices are easing, helping Japan’s trade balance and supporting a stronger yen. While Tokyo’s CPI showed a downside surprise, inflation still remains above the BoJ’s 2% target leaving the door open for policy normalization if global conditions stabilize. 

If the upcoming U.S. payrolls or PCE prints disappoint, USDJPY could decisively break lower. A move toward 142 aligns with short-term fair value models and technical levels.

SHORT USDJPY

Jun 30 2025