The Japanese Yen (JPY) continued its slide against the US Dollar (USD) for the third consecutive session on Tuesday, with the USD/JPY pair climbing to a near two-week high above 149.50. The weakening of the Yen comes as risk sentiment improves, fueled by China’s latest stimulus measures to boost domestic consumption and optimism over a potential Ukraine peace deal ahead of talks between US President Donald Trump and Russian President Vladimir Putin.
Despite these factors, expectations that the Bank of Japan (BoJ) will continue raising interest rates this year, supported by strong wage growth in the recent Shunto labor negotiations, may limit further Yen depreciation. Additionally, the narrowing Japan-US interest rate gap—amid growing bets on multiple Federal Reserve (Fed) rate cuts this year—could help curb deeper losses for the Japanese currency.
Key Market Developments
China’s recent stimulus measures and hopes for a Ukraine ceasefire have bolstered global risk appetite, weighing on the safe-haven Yen.
Japan’s Finance Minister Katsunobu Kato reiterated that bond markets should determine yield movements, following a record-high spike in 40-year Japanese government bond yields.
Japan’s spring labor negotiations resulted in significant wage hikes for the third consecutive year, supporting inflation and providing room for the BoJ to tighten policy.
Markets are pricing in 25 basis-point Fed rate cuts in June, July, and October, driven by concerns over a tariff-induced US economic slowdown, a cooling labor market, and easing inflation.
February US Retail Sales rose by just 0.2%, below expectations of 0.7%, reinforcing the case for Fed rate cuts.
Technical Outlook: USD/JPY Targets 150.00
Technically, the USD/JPY pair’s breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart, coupled with strengthening momentum indicators, suggests the potential for further gains. A move toward the 150.00 psychological level appears likely, though resistance near 150.75-150.80 (200-period SMA) may cap upside momentum.
On the downside, immediate support is seen at 149.20, followed by 149.00 and 148.80. A break below these levels could signal that the recent rally has lost steam, pushing the pair toward 148.25-148.20 and possibly as low as the multi-month low of 146.50 reached on March 11.
Traders are now closely watching upcoming US economic data and the critical BoJ-Fed policy decisions on Wednesday, which will set the stage for the next major directional move in USD/JPY.
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