- The US dollar has weakened against the Japanese yen, amid focus on the relationship between Trump and Powell.
- Expectations around interest rates are bolstering USD strength, while political uncertainty creates some fluctuations in USD/JPY.
- The USD/JPY currency pair has dropped, facing resistance around 149.00.
The Japanese yen (JPY) is attempting to regain some of its recent losses against the US dollar (USD) on Wednesday, fueled by speculation that President Donald Trump might remove Federal Reserve Chairman Jerome Powell.
After rising for three consecutive days, USD/JPY peaked at 149.19 during the day but later pulled back to trade close to the 148.00 mark.
The US dollar started the day strong, but during the morning session, USD/JPY experienced a significant decline due to concerns about Trump possibly considering Powell’s removal. Reports from The New York Times and Bloomberg indicated that officials are discussing whether Trump should let Powell go before his term ends in May 2026.
When asked about it directly, Trump remarked, “We’re not going to do anything, but we’re very concerned.” His comments came in the context of scrutiny over a $2.5 billion renovation of the Fed’s headquarters and Powell’s resistance to easing monetary policy.
Trump’s ambiguous statements added confusion to an already uncertain market facing shifting rate expectations and geopolitical trade risks.
Recent US Consumer Price Index (CPI) data indicated that the Federal Reserve might hold off on cutting short-term rates as inflation rises at the consumer level. However, Wednesday’s producer price index (PPI) data revealed that inflation at the producer level remained unchanged in June.
USD/JPY Technical Analysis: Psychological Resistance at 149.00
Looking at the daily chart for USD/JPY, a clear short-term uptrend is observed, supported by the 10-day Simple Moving Average (SMA) lying above the 50-day SMA. Recently, the pair moved past the 38.2% Fibonacci retracement level from a decline between January and April, which now serves as support at 147.14.
The pair has slightly retreated from this resistance, but the relative strength index (RSI) is still strong at 64, indicating continued upward momentum without excessive buying pressure.
A psychological barrier at 149.00 resists the pair at the 50% level of 149.38, potentially paving the way for a move towards the next significant resistance at a 61.8% retracement of 151.62.
On the other hand, a clear drop below 147.00 might signal a halt in the rally towards a 10-day SMA around 146.70 and a 50-day SMA close to 145.00.
Overall, the technical outlook supports buyers, provided key support levels are maintained.
