USDJPY sell-off targets 161.030 amid lower market volatility and higher inflation expectations in Japan

As of July 16, 2026, the daily USDJPY chart shows extremely low volatility and heightened uncertainty. The silhouettes of Doji-like candles point to a temporary equilibrium between bulls and bears, awaiting a fresh catalyst to break this balance.

Bollinger Bands confirm a market squeeze. The pair sits just above the midline (161.871), while the upper (162.748) and lower (160.994) boundaries continue to converge—a telltale sign of an impending impulse move. The Relative Strength Index (RSI) stands at 52, a perfectly neutral reading that reflects a complete absence of directional momentum.

The Chaikin Oscillator remains in positive territory, which suggests moderate buying interest and a lack of significant selling pressure. However, USDJPY’s dynamics look flat and bleak, showing no signs of a reversal or acceleration of the trend. Altogether, these technical indicators hint at a pause. The pair’s next move is likely to depend on an external trigger.

On the fundamental side, the picture is mixed but generally leans toward a gradual weakening of USDJPY. An unexpectedly weak Producer Price Index (PPI) reading left the dollar without its key pillar of support, pushing market expectations of a July Federal Reserve (Fed) rate hike significantly lower, to 11%. The anticipated monetary tightening had been one of the greenback’s key drivers. The situation in Japan, by contrast, is getting better. Finance Minister Katayama has recently expressed her willingness to encourage the reallocation of Government Pension Investment Fund (GPIF) assets from overseas to domestic markets. This move could boost demand for the yen and strengthen its position. Moreover, inflation concerns in the Asian country are on the rise, with 90.4% of households bracing for future consumer price spikes. Such an environment is likely to toughen the Bank of Japan’s (BoJ) policy stance, putting further pressure on the pair.

Try out the trading plan presented below:

Sell USDJPY at the current price of 162.150. Place Take profit at 161.030 and Stop loss at 162.850.

This forecast remains relevant between July 16 and July 23, 2026.