USDJPY could extend its rally toward target level of 150.30

The USDJPY pair has extended its decline for a third consecutive trading session, remaining under pressure on Thursday. The Japanese yen is strengthening amid multiple factors.

First, Wednesday's wholesale price data revealed Japanese firms persistently passing costs through to consumers. This bolstered expectations for more durable inflation growth and raised the probability of additional monetary policy tightening by the Bank of Japan. Recent hawkish comments from Deputy Governor Shinichi Uchida provided additional support for this tightening scenario.

Second, weakening global risk sentiment, evidenced by falling equity indices, has boosted demand for safe-haven assets like the yen.

On the other hand, the US dollar showed limited movement as investors adopted a cautious stance ahead of the Producer Price Index release and Federal Reserve Chair Jerome Powell's speech.

Amid ongoing economic uncertainty, the US central bank is maintaining its current interest rate policy while evaluating the impact of external factors. Market participants continue to price in 50 basis points of rate cuts by year-end, though expectations for the first reduction have now shifted from July to October.

Nevertheless, optimism about US-China trade de-escalation could restore USDJPY's upward trajectory.

From a technical perspective on the H4 timeframe, the currency pair is forming a broadening wedge pattern (commonly called a 'megaphone'). This structure reflects increasing volatility and strong battle between bulls and bears. However, its upward slope suggests bullish sentiment currently dominates.

The Relative Strength Index (RSI, 14) is approaching the oversold zone, increasing the likelihood of a new upward momentum.

Signal:

The short-term outlook for USDJPY suggests buying.

The target is at the level of 150.30.

Part of the profit should be taken near the level of 148.30.

A stop loss could be placed at the level of 143.80.

The bullish scenario is short-term, so a trading volume should not exceed 2% of your balance.