- The USD/JPY remained steady on Tuesday after a nearly 2% increase the previous day, driven by a stronger US dollar amid easing trade tensions.
- The Bank of Japan (BOJ) has shown a commitment to gradually increase rates, interpreting US tariffs as temporary disruptions with minimal long-term inflation effects.
- The currency pair faces resistance at 148.65, with potential downward risk towards significant support levels at 50 EMA, 145.00, and 142.00.
The Japanese Yen (JPY) held steady near 148.00 against the US Dollar (USD) on Tuesday, pausing after a significant rise the day before. Despite this brief retreat, the US dollar remains strong, buoyed by a slight easing of US-China trade tensions. Over the weekend, negotiators from both countries met in Switzerland and decided to lower the tariffs from 30% to 10% for US imports from China over the next 90 days, which has somewhat restored investor confidence. Meanwhile, Japan seems to be handling its tariff discussions with the US cautiously, perhaps trying to gain some leverage in hopes of better outcomes as domestic pressures mount in the US. So far, though, these talks haven’t led to any major breakthroughs.
On the Japanese front, the BOJ continues its careful approach despite rising concerns about trade issues. In a speech to Congress on Tuesday, the BOJ’s deputy governor expressed hope that wages and prices would continue to rise, reiterating their view that inflationary pressures persist. Uchida mentioned that US tariffs might hinder short-term economic growth, yet the BOJ will raise interest rates if the economic and inflation forecasts play out as expected.
This stance aligns with the BOJ’s policy discussions from late April, which characterized the influence of tariffs as a short-term shock rather than a long-term threat to inflation or growth potential. Nevertheless, policymakers stressed the importance of remaining adaptable and vigilant due to ongoing global uncertainties.
At this moment, market attention is on the upcoming US Consumer Price Index (CPI) data for April, which is set to be released later today. Analysts predict a 0.3% month-over-month increase in CPI, maintaining an annual rate of 2.4%. Core CPI also is expected to rise by 0.3% in April, stabilizing at 2.8% year-on-year.
USD/JPY is near 148.00, with a potential breakout target at 148.65 shifting focus past 145.00.
Technically, the currency pair crossed above its 50-day moving average (EMA) on Monday, though it faced rejection on Tuesday after hitting a peak of 148.65. If this upward movement continues past resistance, we could see a rally towards the psychological level of 150.00, aligning with a 200 EMA at 149.64 and an April swing high.
On the downside, the immediate support provided by the 50-day EMA is around 146.30. A breach below this could shift attention to the psychological level of 145.00. If the price falls below this, it might attract more selling pressure, revealing potential lows around the 142.00 area from last week.
The daily chart’s relative strength index (RSI) is increasing and nearing an overbought condition, currently at 59.68, suggesting bullish momentum.
