The USDJPY pair is declining due to risk-off sentiment and falling Treasury yields. Since Friday, the US dollar has shown relative strength against major currencies following disappointing US data, including a weak Flash Services PMI and rising long-term inflation expectations.
This shift in sentiment has raised concerns about potential economic slowdown and the Federal Reserve’s response on interest rates. Upcoming reports, such as Non-Farm Payrolls and Consumer Price Index, may influence market movements ahead of the March FOMC decision.
Technically, USDJPY is near the 148.60 level, where buyers may emerge, while sellers aim for a decline towards 140.00. On the 4-hour and 1-hour charts, a minor downward trendline and a broken counter-trendline indicate continuation of bearish momentum.
Key economic data is on the horizon, including the US Consumer Confidence report, Jobless Claims, Tokyo CPI, and US PCE data.
The retreat in USDJPY stems from a combination of falling Treasury yields and a preference for safer assets. Since the end of last week, the dollar has managed to retain strength against other major currencies despite weaker-than-expected economic data in the US. The Flash Services PMI revealed sluggish activity, adding to concerns about broader momentum in the economy. At the same time, long-term inflation expectations have inched upwards, bringing fresh questions about the Federal Reserve’s policy stance in the coming months.
Market participants are now weighing the potential for economic strain against the likelihood of rate decisions ahead. The Federal Reserve has repeatedly signalled that incoming data will dictate its approach, making upcoming reports especially important. The release of Non-Farm Payrolls and CPI figures will provide further insight into whether inflation is still running hotter than policymakers would prefer. These numbers stand to influence positioning well before the Federal Open Market Committee meets in March.
From a technical standpoint, the currency pair is hovering near 148.60, an area that has previously attracted buying interest. If price action finds support here, short-term traders may look for upward reactions. On the other hand, sellers remain active, keeping targets in sight as low as 140.00. Shorter-term charts continue to reinforce the prevailing downward bias—minor trendlines suggest momentum is leaning in favour of further declines, especially as any counter-trend reactions have struggled to hold.
Looking ahead, there are multiple data releases that could sway sentiment further. US Consumer Confidence figures will shed light on whether Americans remain optimistic in their spending outlook. Jobless Claims will provide a pulse check on the labour market’s stability. Meanwhile, inflation measures out of Tokyo will offer an early signal on price trends in Japan. Rounding out the week, the US PCE data—widely regarded as a key inflation gauge for the Fed—will be watched closely.
Taken together, recent trading activity points to one thing: sensitivity to economic updates. Movements in USDJPY are increasingly reactive to any shifts in the outlook for interest rates, both in the US and Japan. That means each of these releases has the potential to move the needle, even if only briefly. For now, short-term movements are favouring the path lower, but the weight of upcoming economic indicators could either reinforce or disrupt that direction.
