USDJPY growth momentum to continue after short pause

The USDJPY currency pair showed the strongest growth since December 19 at the end of Wednesday's trading session. The quotes rose by 1.3%, offsetting almost all of the previous week's decline. Today the buyers of the dollar against the yen took a little pause, but the scale of the correction is unlikely to be significant. The price has good chances to continue the upward movement from the level of 154 to the next target of 154.9.

The wave of USDJPY purchases was triggered by the released statistics on US inflation for January. The figures exceeded analysts' expectations, and the next Fed rate cut is now expected no earlier than July. Japan is also dealing with prices rising too fast, as confirmed by today's data from the country's companies. However, the stronger yen against the US currency does not leave room for more declines, and traders are looking for long positions.

This change in the currency market sentiment was also noted by Bloomberg analysts. According to their estimates, the bulls have withdrawn from USDJPY contracts over $100 million in recent days. Barclays Plc's Jerry Minier points out the loss of investors' interest in the yen while demand for the euro and the Australian dollar is growing. Therefore, the Japanese currency is at risk of losing much of the gains made since the beginning of 2025.

Fukuoka Financial Group experts expect USDJPY to rise to the level of 157 over the coming days. They believe that many traders are holding long yen positions with leverage, and the amount of losses is becoming too high. The short squeeze effect may quickly return the quotes to the levels of mid-January. The three-day drop in the premium for hedging the yen growth rate against the dollar and the euro speaks in favor of such a scenario.

The Stochastic indicator confirms the price reversal upward. The nearest target for the buyers will be 154.9.

Consider the following trading strategy:

Buy USDJPY around the level of 154. Take profit – 154.9. Stop loss – 152.8.