USDJPY, Gold Forecast: Markets Hold Ahead of FOMC

• Key Events: FOMC Meeting, US Advance GDP, Tokyo CPI, US Core PCE
• Technical Analysis: USDJPY, Gold 3-Day Time Frame

USDJPY Risks

The Japanese yen is currently experiencing a pause in movement, as the US Dollar Index (DXY) remains below its 110-resistance level. A potential breakthrough above this level could occur if tariffs against China, Canada, or the Eurozone are officially implemented.

Market sentiment is also shifting towards a possible increase in Tokyo Core CPI data on Friday, as Japan's inflation has reached a five-month high. This development has strengthened the expectations of prolonged BOJ rate hikes in 2025, raising concerns over yen carry trades, as investors anticipate a potential reversal in the USDJPY pair.

If the US dollar enters a stronger bullish phase—driven by tariff implementations, inflation risks, and a USDJPY retest of the critical 160 level—heightened volatility may emerge. This scenario could also increase the likelihood of BOJ intervention in the markets to stabilize the yen.

Market Uncertainties Persist and Gold Stabilizes on Haven Demand

Amid inflation concerns, trade tensions, and tariff war risks, gold continues to hold near its record highs, supported by safe-haven demand. The introduction of DeepSeek AI into the market has fueled uncertainty regarding the valuation of the technology and AI sectors. Additionally, tariff risks are exerting bearish pressures on global economies and currencies, reinforcing the precious metals sector as an attractive safe-haven investment until market uncertainty subsides.

Looking ahead, key central bank insights from the Federal Reserve (FED) and European Central Bank (ECB) are expected to shape market sentiment. Additionally, Japan's Tokyo CPI report on Friday is likely to drive anticipation for the upcoming BOJ policy meeting, increasing volatility risks on the Yen.

USDJPY Forecast: 3Day Time Frame – Log Scale

Source: Tradingview

The USDJPY pair rebounded from the previously mentioned support level near 153.60, stabilizing at 153.70, which aligns with the 0.272 Fibonacci retracement of the September 2024 – January 2025 uptrend. The pair then climbed back toward the lower boundary of the primary channel established between January 2023 and July 2024, supported by a rebound in the RSI indicator from the neutral 50 zone, reinforcing a bullish scenario on the charts.

Looking ahead, resistance levels to watch before testing the critical 160 level, where high volatility risks may emerge, include 156.80 and 159.00. On the downside, a sustained break below 153.60 could trigger further losses toward the next Fibonacci retracement levels at 151.40, 149.40, and 147.00, aligning with 0.382, 0.5, and the golden 0.618 retracement levels.

Gold Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

Gold broke out from its November 2024 – January 2025 consolidation phase above the $2,730 resistance, rallying toward its record high of $2,790, where it briefly pulled back to $2,786 before retesting its previous resistance-turned-support at $2,730. The metal has since rebounded, making its way back toward the $2,760 zone, with a firm break above $2,800 needed to extend the triangle breakout target and sustain bullish momentum toward $2,920, which could then lead to a potential test of the $3,000 milestone.

On the downside, a confirmed close below $2,730 could shift sentiment to bearish, with the next key support level at $2,620. Given that gold has now tested the $2,790 zone twice, a bearish continuation could establish a double-top pattern, increasing the probability of a deeper pullback toward $2,520, $2,420, and $2,300.

Written by Razan Hilal, CMT

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