Trade of The Day – USD/JPY

Facts:

• Market implies 3.3 rate cuts in the US  (30% chance of fourth rate cut at the end of 2025) and 0.8 rate hike in Japan (80% chance of one rate hike at the end of 2025)
• RSI is currently at 44.5, while MACD has recently created bullish crossover
• Tokyo’s core inflation (excluding fresh food) jumped to 3.4% year on year from 2.4% in March and was above the consensus forecast of 3.2%

Recommendation:

• Transaction: Long position on USDJPY  at market price
• Target: 146.478
• Stop: 140.416

Opinion:

The RSI is in bullish divergence, forming higher highs and approaching a level that recently served as a strong reversal zone. A break above this level could signal renewed bullish control. The MACD is widening following a bullish crossover. The take-profit level is set just below the 38.2% Fibonacci retracement, which coincides with the 50-day EMA and is expected to act as resistance. The stop-loss is placed just below the recent closing low at 140.416.

From a macroeconomic perspective, the divergence between US and Japanese monetary policies creates a favorable trading window. Markets have likely overestimated Fed rate cuts given US economic resilience, while BOJ’s normalization path faces near-term delays due to external risks from US tariff threats. This policy timing mismatch supports USDJPY appreciation in the short term before longer-term fundamentals eventually favor the yen.