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Goldman Sachs turns even more bearish on yen

Goldman Sachs has significantly raised its forecasts for the USD/JPY pair, becoming one of the most bearish investment banks on the Japanese currency. The bank’s strategists now expect the exchange rate to rise from their previous 12-month target of 155 to 165 yen per U.S. dollar, which would mark the weakest level for the yen since 1986—nearly 40 years ago.

Key Takeaways

  • Goldman Sachs raised its 12-month USD/JPY forecast from 155 to 165.
  • The bank also lifted its 3-month forecast from 160 to 162 and its 6-month target from 158 to 163.
  • The yen remains close to its weakest levels in four decades, with USD/JPY currently trading around 162.
  • According to Bloomberg’s survey, Goldman is now among the most bearish institutions on the Japanese currency.
  • Options markets imply roughly a 72% probability that USD/JPY reaches 165 by June next year.
  • Hedge funds are holding their largest net short positions in the yen since 2017.

Why Does Goldman Expect Further Yen Weakness?

According to Goldman Sachs FX strategist Karen Reichgott Fishman, three key factors are driving the bank’s revised outlook:

  • persistently high U.S. Treasury yields,
  • mounting fiscal pressures in Japan,
  • and the Bank of Japan’s very gradual pace of interest rate hikes.

At the same time, Goldman acknowledges that the yen already appears significantly undervalued based on its fundamental valuation models. However, that alone is not enough to trigger a sustained recovery. The bank argues that the wide interest rate differential between the United States and Japan, together with the divergence in monetary policy, continues to strongly favor the U.S. dollar.

Carry Trades Remain a Major Driver

Goldman Sachs continues to favor using the yen as the preferred funding currency for carry trades. The strategy is straightforward:

  • investors borrow low-cost yen,
  • sell the currency in the FX market,
  • and invest the proceeds in higher-yielding assets such as U.S. bonds or emerging-market currencies.

As long as the Bank of Japan maintains relatively accommodative financial conditions, carry trades are likely to remain attractive, adding further depreciation pressure on the yen.

Can Japan Stop USD/JPY From Rising?

Goldman remains skeptical about the effectiveness of future currency interventions. Although Japan’s Ministry of Finance has hinted that future interventions could become less predictable, the bank believes even direct yen-buying operations would likely generate only a temporary correction. Unless there is a meaningful decline in U.S. Treasury yields, a more hawkish Bank of Japan, or a significant narrowing of the U.S.-Japan interest rate gap, the fundamental drivers of yen weakness are likely to remain firmly in place.

Markets Are Increasingly Pricing in USD/JPY at 165

One notable aspect of Goldman’s outlook is how closely it aligns with broader market positioning. Currently:

  • hedge funds hold their largest net short yen positions in eight years,
  • FX derivatives imply roughly a 72% probability of USD/JPY reaching 165 by the middle of next year,
  • and an increasing number of investors view shorting the yen as one of the most crowded trades in global currency markets.

While this reinforces the prevailing uptrend, it also increases the risk of sharp corrections should expectations for the Federal Reserve or the Bank of Japan change unexpectedly.

What Could Change the Outlook?

The key near-term event will be the release of this week’s Federal Reserve meeting minutes. Investors will focus primarily on:

  • signals regarding future Fed rate cuts,
  • the direction of U.S. Treasury yields,
  • upcoming Bank of Japan policy decisions,
  • and the possibility of intervention by Japanese authorities.

A hawkish set of Fed minutes could strengthen the U.S. dollar further, putting renewed pressure on both the yen and the euro. Conversely, weaker U.S. economic data could lower Treasury yields and provide temporary relief for non-dollar currencies.

USD/JPY Technical Analysis (D1)

USD/JPY remains in a strong uptrend and continues to trade within a well-defined ascending price channel. The lower boundary of the channel is currently located near 158, a level that was last tested in May. In the short term, resistance is seen around 162.8 , corresponding to the pair’s recent swing highs. A sustained break above this level could reinforce bullish momentum, while a rejection may trigger another pullback toward the lower boundary of the ascending channel. 165 level i now probably the strongest resistance zone.

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EUR/JPY Price Tests 185.00 after breaking above moving averages

  • EUR/JPY could test the upper boundary of the symmetrical triangle around 185.90.
  • The 14-day Relative Strength Index is at 51, hinting at neutral-to-firm momentum.
  • Initial support aligns with the 50-day EMA of 184.91.

EUR/JPY gains ground for the second successive day, trading around 185.00 during the Asian hours on Monday. The currency cross holds a constructive near-term bias as it trades above the nine-period and 50-period Exponential Moving Averages (EMAs).

The volume-weighted average price (VWAP) is reinforcing underlying demand around 184.31. The 14-day Relative Strength Index (RSI) hovers near 51, reflecting neutral-to-firm momentum as the spot price solidifies above key dynamic support levels.

The technical analysis of the daily chart suggests that the EUR/JPY cross is remaining within the symmetrical triangle, indicating that both buyers and sellers are becoming increasingly aggressive, squeezing the price into a tighter and tighter range. Neither side has taken control yet, creating a temporary balance of power.

Further advances would support the EUR/JPY cross to test the upper boundary of the symmetrical triangle around 185.90. A break above the triangle would cause the bullish emergence and expose the all-time high of 187.95, which was recorded on April 17.

On the downside, initial support lies at the 50-day EMA of 184.91, followed by the nine-day EMA at 184.71. Further declines would expose the symmetrical triangle’s lower boundary around 183.60, followed by the four-month low of 181.87, recorded on March 16, and the six-month low of 180.81.

Chart Analysis EUR/JPY
EUR/JPY: Daily Chart

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.02%0.05%0.29%0.07%0.13%0.37%0.11%
EUR-0.02%0.03%0.26%0.05%0.12%0.38%0.09%
GBP-0.05%-0.03%0.22%-0.02%0.04%0.32%0.07%
JPY-0.29%-0.26%-0.22%-0.23%-0.16%0.06%-0.12%
CAD-0.07%-0.05%0.02%0.23%0.05%0.31%0.07%
AUD-0.13%-0.12%-0.04%0.16%-0.05%0.26%0.04%
NZD-0.37%-0.38%-0.32%-0.06%-0.31%-0.26%-0.26%
CHF-0.11%-0.09%-0.07%0.12%-0.07%-0.04%0.26%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

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Japanese Yen weakens under high import costs despite JGB yield hitting 30-year highs

  • USD/JPY rises as the Japanese Yen falls amid high import costs.
  • 10-year JGB yield reaches a fresh 30-year high of 2.79%.
  • The US Dollar remains strong as markets price in multiple Fed rate hikes this year.

USD/JPY extends its gains for the second successive day, trading around 161.70 during the Asian hours on Monday. The Japanese Yen (JPY) is caught in a high-stakes tug-of-war, buckling under surging import costs even as 10-year JGB yields hit a fresh 30-year high of 2.79%. This deep market divide has traders on high alert for immediate verbal intervention from Tokyo.

The USD/JPY pair appreciates as the US Dollar (USD) holds its ground, buoyed by market expectations of multiple Federal Reserve (Fed) rate hikes later this year. This comes despite easing global inflation concerns, which have been helped by oil flows normalizing through the critical Strait of Hormuz.

The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of interest rate hikes by year-end. Investors are now looking ahead to Wednesday’s release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.

Recent US labor data have forced Wall Street to aggressively rethink this hawkish outlook. The latest Nonfarm Payrolls (NFP) report revealed the US economy added a mere 57,000 jobs last month, severely missing the market’s forecast of 110,000. While the headline unemployment rate did manage an unexpected drop to 4.2% from May’s 4.3%, the dramatic hiring slowdown strongly signals that the broader economy is cooling down.

Fed Chair Kevin Warsh firmly reaffirmed the central bank’s independent commitment to its 2% price stability target. Notably, he also acknowledged that inflation risks and expectations have finally begun to moderate over the past month.

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AUD/JPY Price – Holds gains near 112.00, but bearish bias persists below key moving averages

  • AUD/JPY edges higher to near 111.75 in Friday’s early European session.
  • The cross keeps the bearish vibe, with subdued RSI momentum.
  • The initial support level is located at 111.15; the immediate resistance level to watch is 112.40.

The AUD/JPY cross trades in positive territory around 111.75 during the early European trading hours on Friday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) following the Chinese economic data. China’s Services Purchasing Managers’ Index (PMI) eased slightly to 54.1 in June from 54.4 in May, according to RatingDog on Friday.

However, this figure still marked the third-steepest increase in services activity in nearly three years. Services exports grew for a second consecutive month, expanding at the fastest rate since October 2024. 

The potential upside might be limited amid fears of intervention from Japanese authorities. Japan’s Finance Minister Satsuki Katayama said on Friday that officials are ready to act appropriately on currency fluctuations. 

Chart Analysis AUD/JPY

Technical Analysis:

In the daily chart, AUD/JPY holds below a dense support band defined by the 100-day Moving Average (MA) and the middle Bollinger simple moving average, hinting downtrend in the near term. The Relative Strength Index (14) hovers just above 40, hinting at subdued bullish conviction while stopping short of outright oversold conditions.

On the downside, initial support emerges around the lower Bollinger Band near 111.15, where sellers could pause before targeting deeper retracements. On the topside, bulls would need a daily close back above the 100-day MA at 112.40 and the Bollinger midline at 112.42 to ease the current bearish pressure and open the door for a more sustained recovery toward the broader consolidation highs.

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Chart of The Day – Is The USD/JPY in a stable trend or at a turning point?

USDJPY is trading slightly lower this morning at 162.70 (-0.15%) after hitting new multi-year highs around 163, as the market awaits the key U.S. payrolls report.

Context of Today’s NFP Data

Today’s June payrolls report is the main catalyst of the day—the consensus expects a marked slowdown to about 110,000 jobs following a surprisingly strong May reading of 172,000, with the unemployment rate holding steady at 4.3% and wage growth accelerating to 3.5% y/y. The market is trying to assess whether May’s surge represented a genuine labor market recovery or merely a one-off effect (including the World Cup in the U.S.). Employment growth this year has averaged above 80,000, which supports the scenario of a resilient labor market. CBA warns that another positive surprise could push USD/JPY toward 165 and test the Japanese authorities’ determination to defend the yen, while a weak reading (below 70,000–90,000) would ease pressure on the Fed to remain hawkish and could trigger a downward correction in the pair.

Technical Analysis

The price broke through key resistance levels at 159.52 and 160.52 JPY with momentum, moving clearly above the 50-day EMA (160.29), the 100-day EMA (159.21), and the 200-day EMA (157.31), confirming a strong uptrend. However, the RSI at 71.8–76.2 signals overbought conditions on the daily chart, which historically has preceded short-term consolidations or corrections, especially near multi-year highs. The trend remains clearly bullish for the dollar (bearish for the yen), and the 162–163 range also represents an area of heightened risk of currency intervention by Japanese authorities. Source: xStation

A Brief Look at Data from Japan

The Bank of Japan raised its policy rate to 1.0% in June—the highest level in 31 years—but the market does not expect another hike until the October–December 2026 window, even though about 90% of economists anticipate one more hike by December. This slow pace of policy normalization by the BoJ, coupled with the hawkish stance of the Fed, is the main structural reason why the interest rate differential between the U.S. and Japan remains wide and is sustaining the yen’s long-term downward trend—verbal interventions by Japanese officials have so far failed to permanently reverse this trend.

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Australian dollar holds ground vs Japanese Yen amid May Trade Deficit

  • AUD/JPY remains calm following missing domestic trade data expectations.
  • Australia’s Trade Balance shifted to a A$3,018M deficit in May, reversing April’s surplus.
  • The Japanese Yen may receive support amid the potential for government intervention.

AUD/JPY remains flat after recovering daily losses, trading around 112.10 during the Asian hours on Thursday. The currency cross held its ground as the Australian Dollar (AUD) showed resilience, even after domestic trade data significantly missed market expectations.

According to the Australian Bureau of Statistics (ABS), the Trade Balance unexpectedly swung into a deficit of A$3,018 million in May, a sharp reversal from the previous month’s revised surplus of A$1,383 million. This fell well short of the market consensus, which had anticipated a surplus of A$2,200 million. The downturn was primarily driven by a 6.9% month-on-month plunge in exports, compounded by a 2.6% increase in imports.

The AUD/JPY cross moves little as the Japanese Yen (JPY) remains under intense pressure despite mounting evidence that the Bank of Japan (BoJ) may continue normalizing its monetary policy. Japan’s latest Q2 Tankan Large Manufacturing Index climbed to 22 from 17 prior, the highest level in eight years, strengthening the case for further interest rate hikes later this year.

The JPY continues to languish near its weakest level against the US Dollar (USD) in four decades. This prolonged weakness has kept traders on high alert for potential government intervention, which could put downward pressure on the AUD/JPY cross, especially ahead of a US public holiday when thinner market liquidity could magnify the impact of any official action. Reinforcing this caution, Finance Minister Satsuki Katayama reiterated warnings that authorities stand ready to respond appropriately to currency market developments at any time.

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EUR/JPY Price Forecast: Edges lower below 185.00, while near-term bullish bias holds

  • EUR/JPY posts modest losses near 184.95 in Thursday’s early European session.
  • The cross keeps a bullish near-term tone, but further consolidation cannot be ruled out amid neutral RSI momentum.
  • The first upside barrier is seen at 185.00; the initial support level to watch is 184.90.

The EUR/JPY cross trades on a negative note around 184.95 during the early European session on Thursday. Eurozone inflation fell more than expected in June, easing pressure on the European Central Bank (ECB) to raise rates at its next meeting on July 23. This, in turn, could weigh on the Euro (EUR) against the Japanese Yen (JPY).

Data released by Eurostat on Wednesday showed that Eurozone inflation, as measured by the Harmonized Index of Consumer Prices (HICP), dropped to 2.8% YoY in June from 3.2% in May. This figure came in below the consensus of 3.0%.

Morgan Stanley economists said softer Eurozone June inflation could also “lower the bar a touch for the ECB to be on hold in September,” adding that energy pressures likely had a “limited” direct impact on eurozone prices.

Following Wednesday’s print, traders continued to anticipate the ECB to deliver another quarter-point rate rise by the end of this year, according to Morningstar.

Chart Analysis EUR/JPY

Technical Analysis:

In the daily chart, EUR/JPY holds above the Bollinger Bands middle line and the 100-day moving average, keeping a mildly bullish near-term tone as price gravitates near recent highs. The Relative Strength Index (14) hovers around 50, suggesting balanced momentum and favoring a continuation of range-bound gains rather than an impulsive breakout.

On the topside, immediate resistance is located at the 185.00 psychological level, en route to the June 30 high of 185.86. The next hurdle emerges at the Bollinger Bands upper band near 186.15, where bullish attempts could meet profit-taking. 

On the downside, initial support is seen at the Bollinger middle band at 184.90, followed by the 100-day moving average at 184.65; a deeper pullback would expose the lower Bollinger band support around 183.65.

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USD/JPY Price – Extends rally to near 162.70 amid soaring US bond yields

  • USD/JPY rises to near 167.73 as US Treasury Yields soar, following upbeat US JOLTS Job Openings data.
  • Investors shift their focus to the US ADP Employment Change and the ISM Manufacturing PMI data for June.
  • Japan’s officials have signaled that they are ready to intervene to support the Yen.

The USD/JPY pair trades 0.1% higher to near 162.73 during the European trading session on Wednesday. The pair reflects strength as surging United States (US) Treasury Yields have strengthened the US Dollar (USD).

In the European trade, 10-year US Treasury Yields are up 0.18% to 4.47%, extending Tuesday’s little over 2% gains. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is up 0.16% to near 101.33.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.12%0.14%0.08%0.10%0.36%0.02%0.05%
EUR-0.12%0.02%-0.04%-0.01%0.26%-0.11%-0.05%
GBP-0.14%-0.02%-0.06%-0.03%0.22%-0.13%-0.05%
JPY-0.08%0.04%0.06%0.00%0.29%-0.09%-0.01%
CAD-0.10%0.01%0.03%-0.01%0.27%-0.11%-0.02%
AUD-0.36%-0.26%-0.22%-0.29%-0.27%-0.37%-0.29%
NZD-0.02%0.11%0.13%0.09%0.11%0.37%0.09%
CHF-0.05%0.05%0.05%0.01%0.02%0.29%-0.09%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

US bond yields are soaring due to signs of improving US job market conditions. On Tuesday, the US JOLTS Job Openings data for May arrived at 7.594 million fresh jobs, higher than 7.3 million estimates and the previous reading of 7.585 million.

Meanwhile, investors await the US ADP Employment Change and the ISM Manufacturing PMI data for June, which will be released during the North American session.

On the Tokyo front, investors expect the Japanese administration to intervene anytime soon to support the falling Japanese Yen (JPY). On Tuesday, Japan’s Chief Cabinet Secretary Minoru Kihara said that the administration is always ready to take necessary action on Forex; however, he didn’t deliver any comments regarding specific FX levels.

USD/JPY technical analysis

USD/JPY trades higher at around 162.73, extending its bullish bias as spot holds well above the 20-day exponential moving average (EMA) at 161.19. The overall trend of the pair is bullish, following the breakout of the Rising Channel formation.

The Relative Strength Index (RSI) at 78.45 sits deep in overbought territory, suggesting upside momentum remains strong but also warns that the pair could be vulnerable to bouts of corrective pullback even within the broader uptrend.

On the downside, immediate support is seen at the Rising Channel breakout region near 161.75, followed by the 20-day EMA near 161.19. Looking up, the pair could extend the rally towards 163.00 and 164.00.