The Japanese Yen (JPY) slipped to a one-month low against the US Dollar (USD) during Monday’s Asian session, pressured by rising global risk appetite and renewed optimism over US-China trade negotiations. The easing demand for safe-haven assets, including the JPY, followed encouraging signals from high-level trade talks held in Switzerland over the weekend.
Investors responded positively to the outcome of the two-day summit, where US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer announced a trade agreement with China. China’s Vice Premier He Lifeng echoed this sentiment, calling the discussions “substantial progress” that addressed key bilateral concerns. While specific tariff rollbacks remain unconfirmed—US tariffs on Chinese goods currently stand at 145% with reciprocal Chinese tariffs at 125%—expectations for a formal joint statement later Monday are keeping traders on edge.
The buoyant market mood has sparked a rally in global equities, further eroding demand for traditional safe-haven currencies like the Yen. At the same time, persistent uncertainty over Japan’s growth trajectory amid unresolved trade issues continues to weigh on the currency.
On the flip side, Japan’s stronger-than-expected Household Spending data released Friday offered a glimmer of support for the JPY. The data has bolstered expectations for further policy tightening by the Bank of Japan (BoJ), marking a stark contrast with projections for at least three interest rate cuts by the US Federal Reserve later this year. This divergence in policy outlooks is encouraging some restraint among traders before extending bullish bets on the USD/JPY pair, which has recently rebounded from year-to-date lows just below the critical 140.00 threshold.
The Federal Reserve’s hawkish pause earlier this month and receding fears of a US recession have reinforced USD strength. Fed Chair Jerome Powell has warned that persistent trade tariffs could challenge the central bank’s dual mandate, suggesting a more cautious approach to rate adjustments in the near term. Meanwhile, the US Dollar Index (DXY) is holding near its highest level since April 10.
In Japan, inflationary pressures remain under close watch. While Household Spending showed resilience, real wages declined for a third straight month in March, stoking concerns of deepening price increases. BoJ Governor Kazuo Ueda recently acknowledged delays in achieving the central bank’s 2% inflation target. However, minutes from the BoJ’s March policy meeting confirmed the bank’s readiness to raise interest rates if current inflation trends persist.
Looking ahead, market participants are eyeing several key events that could influence USD/JPY movement. US inflation data due later this week, along with Fed Chair Powell’s Thursday appearance, are expected to provide fresh insights into the Fed’s policy trajectory. On Friday, Japan’s first-quarter GDP figures will also be closely watched for signs of underlying economic strength or vulnerability.
Technical Outlook: USD/JPY Bullish Momentum Building
Technically, the USD/JPY pair has reclaimed ground above the 50% Fibonacci retracement level of its March–April downturn and is showing signs of continued bullish momentum. Momentum indicators on both daily and hourly charts remain in positive territory, suggesting further gains are likely.
A move toward the 61.8% Fibonacci level near the 146.80–146.85 zone appears plausible, with a breakout above that region potentially clearing the way for a test of the psychological 147.00 mark. Sustained strength beyond this level could signal a deeper bullish leg in the near term.
On the downside, immediate support is seen near 145.55, aligned with the 50% retracement level. A drop below this could open the door for a retest of the 145.00 handle—coinciding with the 200-period Simple Moving Average (SMA) on the 4-hour chart. A decisive break beneath that could trigger deeper selling pressure, pushing the pair toward 144.45 and potentially the 144.00 round figure.
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