Japanese Yen stays under pressure against a slightly stronger US Dollar, even amid lingering US-China trade tensions
FUNDAMENTAL OVERVIEW:
- The Japanese Yen edges lower as optimism surrounding a potential US-China trade agreement weakens demand for safe-haven assets.
- Speculation that the Bank of Japan may halt additional rate hikes adds further pressure on the JPY.
- Meanwhile, the contrasting policy outlooks between the BoJ and the Fed will likely keep weighing on the lower-yielding Yen.
The Japanese Yen (JPY) fluctuates between slight gains and modest losses at the start of the new week, staying near the two-week low it recorded against the US Dollar (USD) last Friday. Despite mixed signals from the US and China, investor sentiment remains optimistic about potentially easing trade tensions between the world’s two largest economies. This optimism weighs on the safe-haven JPY and, coupled with a mild uptick in the USD, helps lift the USD/JPY pair back toward the 143.50 level during the early European session.
At the same time, investors appear to have delayed expectations for an immediate interest rate hike by the Bank of Japan (BoJ), reflecting concerns over economic risks posed by US tariffs. Nevertheless, signs of broadening inflation in Japan leave the possibility open for additional BoJ rate hikes in 2025 — a sharp contrast to mounting expectations of further policy easing by the Federal Reserve (Fed). This policy divergence could temper USD buying interest and may limit further downside for the JPY, suggesting caution before positioning for additional upside in the USD/JPY pair.
USD/JPY TECHNICAL ANALYSIS CHART:
Technical Overview:
USD/JPY is trading within an up channel.
USD/JPY is moving above 10&50 Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Buying Zone, while the Stochastic oscillator suggests a Neutral trend.
Immediate Resistance level: 144.28
Immediate support level: 143.17
HOW TO TRADE USD/JPY
After a sustained downtrend, USD/JPY entered a consolidation phase and found support, triggering a sharp bullish reversal. However, the upward momentum was short-lived. Currently, the pair is facing rejection at a key resistance level and is turning lower. If USD/JPY breaks below its immediate support, a deeper decline could follow.