USD/JPY Outlook: The USD/JPY exchange rate is slightly positive but likely to move sideways, trading above its 90-day average and within the mid-range of its recent levels.
Key drivers:
• The Federal Reserve is expected to cut interest rates in the future, which could weaken the USD.
• Oil prices are currently above average, which often supports the JPY due to Japan's energy import needs.
• The Bank of Japan's recent interest rate hike suggests a tightening monetary policy, aiming to combat inflation, despite recent easing of inflation rates in Tokyo.
Range: The USD/JPY is expected to drift within its recent range as fresh volatility from geopolitical events may impact movement.
What could change it:
• Upside risk: Any aggressive action by the BoJ to combat yen depreciation could boost the JPY.
• Downside risk: Renewed trade tensions due to tariff threats could press the USD lower, negatively affecting its value against the JPY.