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USD/JPY Extends Decline as Yen Strengthens and Dollar Softens on Easing Inflation Risks

Published: 8 April 2026,05:34

Daily Market Analysis New

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Key Takeaways:

*USD/JPY falls as dollar weakens and yen gains support

*Strong wage growth in Japan boosts expectations of BoJ rate hike

*Lower yields weigh on dollar and pressure USD/JPY

Market Summary:

USD/JPY extended its losses as a softer U.S. dollar and a strengthening Japanese yen combined to weigh on the currency pair.

The yen found support after stronger-than-expected wage data reinforced expectations that the Bank of Japan could move toward policy tightening as early as this month. According to Japan’s labor ministry, real wages rose 1.9% year-on-year in February, marking the fastest pace of growth since 2021 and exceeding forecasts of 1.3%. Nominal wages also increased by 3.3%, surpassing expectations of 2.7%, highlighting improving income dynamics.

The data adds to the case for further policy normalization, particularly as inflation has remained above the BoJ’s 2% target for several years. However, domestic consumption remains uneven, with households continuing to face pressure from elevated living costs, especially for essential goods.

On the other side, the U.S. dollar weakened as inflation concerns eased following the stabilization of crude oil prices. The recent ceasefire agreement between the United States and Iran has helped reduce fears of supply disruptions, leading to a pullback in oil prices and easing inflation expectations.

This shift has contributed to a decline in U.S. Treasury yields, reducing the relative attractiveness of the dollar. As yields move lower, demand for the greenback has softened, further pressuring USD/JPY.

Overall, the combination of improving domestic fundamentals in Japan and easing inflation-driven support for the dollar has tilted the near-term bias for USD/JPY to the downside, with markets continuing to monitor central bank signals and geopolitical developments for clearer direction.

Technical Analysis

USD/JPY, H4

USD/JPY is trading lower after a breakdown below the 158.95 support level, signaling a shift toward bearish momentum.

Momentum indicators remain negative, with the MACD expanding to the downside and the RSI at 23 in oversold territory, suggesting continued selling pressure in the near term.

A sustained move below current levels could extend losses toward 158.30, with further downside toward 158.05 if bearish momentum persists.

However, if selling pressure begins to fade, the pair may rebound and retest the 158.95 resistance level, marking a potential short-term recovery.

Resistance Levels: 158.95, 159.30

Support Levels: 158.30, 158.05

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