- USD/JPY is trading close to 148.00, up about 2%, following a tariff ceasefire between the US and China, which boosts risk appetite.
- The US and China have settled on a 90-day tariff reduction, with the US lowering its rate to 30% and China to 10%.
- The key support levels are 146.45, 146.29, and 145.69, while resistances are at 149.56, 149.62, and 150.37.
The USD/JPY pair is hovering around 148.00, marked by a 2% increase for the day. This rise is largely driven by a surge in risk-on sentiment after a significant improvement in US-China trade relations. Over the weekend, both nations agreed to cut tariffs for 90 days, with the US reducing tariffs on Chinese imports to 30% from 145%, and China’s duties dropping to 10% from 125%. This temporary easing has negatively impacted traditional safe-haven currencies like the Japanese yen, encouraging investments in riskier assets.
The US dollar has surged in reaction to this trade ceasefire, bolstered by a notable rise in US bond yields. The 10-year Treasury yields have climbed to 4.45%, signaling a drop in short-term expectations for Federal Reserve rate cuts. Furthermore, the US Dollar Index (DXY) has reached 101.74, marking a significant month-over-month gain of over 1.25%, which adds more pressure on the yen. Governor Adriana Kugler indicated that while these tariff cuts are positive, the long-term ramifications for global supply chains remain uncertain, making the Fed’s assessment of the US economy’s fundamental strength more complicated.
On the Japanese side, recent figures show that Japan’s current account surplus in March hit 2.723 trillion yen, exceeding the anticipated 2.465 trillion yen. However, Japanese investors were net sellers of foreign bonds in March, reducing their overseas asset exposure amidst market volatility. This trend highlights a cautious stance among Japanese institutional investors, even amidst active trade developments.
Technical Analysis
The USD/JPY is currently signaling bullish trends, situated near the daily range’s high (145.69 – 148.65), trading close to 148.00 with gains of about 2%. The relative strength index (RSI) resides in the mid-60s, suggesting a neutral state, although the moving average convergence divergence (MACD) shows bullish momentum. If we observe continued neutral momentum, the momentum strength around 5 is evident, with the ultimate oscillator (7, 14, 28) also in the 60s.
The 20-day Simple Moving Average (SMA) supports buying signals, while both the 100-day and 200-day SMAs indicate selling, suggesting a mixed long-term outlook. The 10-day Exponential Moving Average (EMA) and the 10-day SMA are both aligned with the overall bullish sentiment.
Main support levels are positioned at 146.45, 146.29, and 145.69, while resistance levels are commonly seen around 149.56, 149.62, and 150.37. A break above 149.60 could signal more upward potential, while a dip below 146.30 might open the door for a deeper correction.
