- USD/JPY remains confined in the weekly range amid mixed fundamental cues.
- Concerns about Trump’s tariffs weigh on the JPY and lend support to the major.
- The divergent BoJ-Fed expectations cap the pair ahead of the critical US tariffs.
The USD/JPY pair struggles to capitalize on modest intraday gains and remains below the 150.00 psychological mark through the first half of the European session on Wednesday. Investors remain worried that the new US levies would have a far-reaching impact on Japan's key industries. This, in turn, tempers market expectations that the Bank of Japan (BoJ) will raise the policy rate at a faster pace and undermines the Japanese Yen (JPY), which turns out to be a key factor acting as a tailwind for the currency pair.
In fact, US President Donald Trump said on Sunday that reciprocal tariffs would essentially include all nations, dashing hopes that the levies would be limited to a smaller group of countries with the biggest trade imbalances. Adding to this, US Treasury Secretary Scott Bessent said late Tuesday that Trump will impose the highest possible reciprocal tariffs on major trading partners. Moreover, reports suggest that Trump was considering imposing duties on roughly 20% of imports coming into the country.
Meanwhile, the BoJ's Tankan survey released on Tuesday showed that Japanese enterprises raised their inflation forecasts for one year, three years, and five years ahead. This comes on top of strong Tokyo consumer inflation figures on Friday and backs the case for further tightening by the BoJ. Moreover, the market anxiety ahead of the Trump administration's so-called reciprocal tariffs announcement supports the safe-haven JPY, which, along with subdued US Dollar (USD) demand, caps the USD/JPY pair.
The Federal Reserve (Fed) remains in an uncomfortable position amid rising prices and slowing growth, which implies that the economy could be heading toward stagflation. The concerns were further fueled by Tuesday's data showing that the manufacturing sector contracted for the first time in three months and inflation at the factory gate jumped to the highest level in nearly three years. In fact, the US ISM Manufacturing PMI fell to 49 from 50.3 in February and the Prices Paid Index rose to 69.4 from 62.4.
Adding to this, the Employment sub-index highlighted a decrease in the sector's payrolls at an accelerating pace. Separately, the Job Openings and Labor Turnover Survey (JOLTS) revealed that job vacancies on the last business day of February stood at 7.56 million, down from 7.76 million in the previous month. This suggested a slight cooling in the US labor market, which reaffirms market bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon and keeps the USD bulls on the defensive.
The markets are pricing in the possibility that the Fed would deliver a cumulative rate cuts of 80 basis points by the end of this year, which fails to assist the USD to attract any buyers. Furthermore, this marks a big divergence in comparison to hawkish BoJ expectations and could benefit the lower-yielding JPY, suggesting that the path of least resistance for the USD/JPY pair is to the downside. Moving ahead, the US ADP report on private-sector employment could provide some impetus ahead of the key US tariffs.
USD/JPY 4-hour chart
Technical Outlook
From a technical perspective, the USD/JPY pair has been showing resilience below the 100-period Simple Moving Average (SMA) since the beginning of this week. The subsequent move up could favor bullish traders, though neutral oscillators warrant some caution. Moreover, the recent breakdown below a multi-week-old ascending channel makes it prudent to wait for strong follow-through buying before positioning for any meaningful gains.
On the flip side, the 149.30-149.25 area, or the 100-period SMA on the 4-hour chart, could protect the immediate downside ahead of the 149.00 mark and the 148.70 region, or the weekly swing low. Some follow-through selling will be seen as a fresh trigger for bearish traders and make the USD/JPY pair vulnerable to resume a well-established downtrend witnessed over the past three months or so.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Gold hovers around all-time highs near $3,250
Gold is holding steady near the $3,250 mark, fuelled by robust safe-haven demand, trade war concerns, and a softer-than-expected US inflation gauge. The US Dollar keeps trading with heavy losses around three-year lows.
EUR/USD remains firm, struggles to retest 1.1400 and above
By the end of the week, EUR/USD had cooled off from its multi-year peak above 1.1400, settling robustly around 1.1360. Meanwhile, the Greenback remains on the back foot after lacklustre data, stagflation concerns, and global trade war fears.
GBP/USD trims gains, recedes to the 1.3070 zone
GBP/USD now gives away part of the earlier advance to fresh highs near 1.3150. Meanwhile, the US Dollar remains offered amid escalating China-US trade tensions, recession fears in the US, and softer-than-expected US Producer Price data.
Bitcoin, Ethereum, Dogecoin and Cardano stabilze – Why crypto is in limbo
Bitcoin, Ethereum, Dogecoin and Cardano stabilize on Friday as crypto market capitalization steadies around $2.69 trillion. Crypto traders are recovering from the swing in token prices and the Monday bloodbath.
Is a recession looming?
Wall Street skyrockets after Trump announces tariff delay. But gains remain limited as Trade War with China continues. Recession odds have eased, but investors remain fearful. The worst may not be over, deeper market wounds still possible.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.