USD/JPY Q2 Forecast: At Risk of Strong Decline

USDJPY Elliott Wave Count

The Q1 2025 forecast remains intact. If you recall, we provided two models we were watching. Both models called for a decline to 146, with one of the models forecasting further declines to below 140. On January 10, 2025, USDJPY did begin a downtrend and reached a low of 146.54 on March 11, right in line with our forecast.

We don’t have enough price action evidence to eliminate either of those two options from Q1. Therefore, we resubmit both options again for Q2. The difference this time, one of the models will separate itself from the other. By the end of Q2, there is a strong possibility we’ll know which Elliott wave count is primarily in development.

The first model that I’m leaning on is that wave three at multiple degrees of trend is about to unfold to the downside. This means a large decline that carries below 140 and possibly reaches 128 in the next couple of quarters. 

This is a tremendous move and it could be fueled by the Fed cutting interest rates as previously mentioned. Additionally, don’t rule out the Bank of Japan exerting pressure on the currency pair. Japanese interest rates are reaching multi-decade highs. In fact, the Japanese 1-year bond yield has been leading the BOJ interest rate higher. 

The 1-year interest rate has reached 0.70% while the BOJ target rate sits at 0.50%. This divergence in monetary policy between the Fed and BOJ could be just the fertilizer to cause a dramatic trend lower in USDJPY. 

If a strong decline fails to materialize, then we’ll consider the potential for wave ‘C’ of a large triangle in place at 146. This means the next couple of quarters will include a small rally in wave ‘D’ and decline in wave ‘E’ to finalize the pattern. (red labels in the Elliott wave chart)

View our other Q2 forecasts at:
Q2 Equities

Q2 Commodities
Q2 Forex

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