Japanese Yen Struggles Near Two-Week Low Amid Trade Optimism and BoJ Policy Hopes

Japanese Yen Struggles Near Two-Week Low Amid Trade Optimism and BoJ Policy Hopes

JPY Weakens on Trade Sentiment, but BoJ Hopes Limit Further Declines

The Japanese Yen (JPY) continues its consolidative tone, trading close to a two-week low versus the US Dollar (USD) during early European hours on Wednesday. While optimism over US-China trade talks reduces safe-haven demand for the Yen, expectations for further Bank of Japan (BoJ) tightening keep broader bearish bets in check.

Soft Wholesale Inflation Reduces Immediate Pressure on BoJ

Japan’s annual Wholesale Price Index (WPI) revealed a moderation in May inflation, which could ease near-term pressure on the BoJ to hike rates further. Still, markets are cautious in writing off the possibility of BoJ normalization, especially with the Yen still undervalued historically.

USD/JPY Consolidates Gains, but Lacks Strong Momentum

USD/JPY is supported by modest US Dollar strength, but upside momentum appears capped. This is partly due to the Fed’s 2025 rate cut expectations, which restrict the USD's ability to extend gains. The BoJ-Fed divergence continues to influence the pair, though with limited conviction as traders await a catalyst.

US CPI in Focus for Directional Moves

The market is likely to remain range-bound ahead of the release of US Consumer Price Index (CPI) data due later today. A 2.5% YoY CPI print is expected, and the results could tip the balance in favor of either the USD or JPY, depending on how the numbers affect Fed rate cut speculation.

Key Technical Levels:

• Immediate resistance: 157.10
• Support zone: 155.60
• Breakout confirmation: Above 157.50 or below 155.20

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