USDJPY: SELL 147.85, SL 148.35, TP 147.05 | 20 August 2025

Event to watch today:

19.08 15:30 EET. USD - Building Permits

USDJPY:

USD/JPY trades near 147.8 after a volatile week. Support for the yen has strengthened on the back of stronger-than-expected Japanese GDP and signs of broadening domestic demand, which reduce the likelihood of deeper easing by the Bank of Japan. With inflation holding at moderate levels and business activity improving, the BoJ has a bit more room to continue a cautious normalization path, albeit without abrupt steps.

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The key external driver remains US Treasury yields: growing expectations for a Fed shift and possible rate cuts by September are capping yields, depriving the dollar of sustained support versus the yen. Against this backdrop, the tactical “sell the rallies” idea in USDJPY remains valid, especially as IMM net USD longs have been pared back and hedging demand is picking up ahead of Fed communications.

A modest improvement in global risk appetite adds to the backdrop: with lower volatility and no fresh shocks, the dollar’s safe-haven premium is easing, which typically favors the yen. As a result, the base case over the coming sessions is a gradual USDJPY pullback, assuming no hawkish surprises from the US data flow.

Trading recommendation: SELL 147.85, SL 148.35, TP 147.05

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