USD/JPY Forecast: Overbought RSI Reading Persists
USD/JPY Outlook
USD/JPY pulls back from a fresh yearly high(145.07) as the US Personal Consumption Expenditure (PCE) Price Index reveals slowing inflation, but the exchange rate may continue to carve a series of higher highs and lows as the Relative Strength Index (RSI) sits in overbought territory.
USD/JPY Forecast: Overbought RSI Reading Persists
The recent rally in USD/JPY has pushed the RSI to its highest level this year and the bullish momentum looks poised to persist as long as the oscillator holds above 70.
Join David Song for the Weekly Fundamental Market Outlook webinar. Register Here
As a result, USD/JPY may attempt to test the November 2022 high (148.83) as Federal Reserve officials project a steeper path for US interest rates, and the Non-Farm Payrolls (NFP) report may push the central bank to reestablish its hiking-cycle as the update is anticipated to show a further improvement in the labor market.
The US economy is anticipated to add 200K jobs in June while the Unemployment Rate is projected to hold steady at 3.7% during the same period, and ongoing signs of a tight labor market may generate a bullish reaction in the Greenback as it fuels speculation for higher interest rates.
Source: CME
According to the CME FedWatch Tool, market participants are pricing a greater than 80% probability for a 25bp rate hike in July, and the deviating paths for monetary policy may keep USD/JPY afloat as the Bank of Japan (BoJ) sticks to Quantitative and Qualitative Easing (QQE) with Yield-Curve Control.
With that said, USD/JPY may appreciate ahead of the NFP report as it extends the series of higher highs and lows from earlier this week, and the exchange rate may continue to retrace the decline from the November 2022 high (148.83) as the Relative Strength Index (RSI) holds above 70.
Japanese Yen Price Chart – USD/JPY Daily
Chart Prepared by David Song, Strategist; USD/JPY on TradingView
- USD/JPY registers a fresh yearly high (145.07) ahead of July as it extends the series of higher highs and lows from earlier this week, and the exchange rate may continue to retrace the decline from the November 2022 high (148.83) as the Relative Strength Index (RSI) holds above 70.
- A break/close above 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement) region may push USD/JPY towards the November 2022 high (148.83), with the next area of interest coming in around 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension).
- However, looming developments in the RSI may show the bullish momentum abating if it falls from overbought territory, with a pullback in USD/JPY bringing the 141.50 (38.2% Fibonacci extension) to 142.50 (61.8% Fibonacci retracement) zone back on the radar.
Additional Market Outlooks:
USD/CAD Forecast: Test of Former Support in Focus
GBP/USD Susceptible to Test of 50-Day SMA
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.
GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2025