The Japanese Yen (JPY) is unable to maintain its recent gains against the US Dollar (USD) and faces renewed selling pressure during the Asian session on Tuesday. Investors remain uncertain about the timing of the Bank of Japan’s (BoJ) next interest rate hike, with some speculating that the central bank may delay its decision until spring 2025. Meanwhile, reports about US President-elect Donald Trump’s economic team considering a gradual ramp-up in tariffs have boosted investor confidence, further weakening the Yen as a safe-haven currency.
Additionally, the Federal Reserve’s (Fed) hawkish stance following Friday’s strong US Nonfarm Payrolls report has raised doubts about any imminent narrowing of the US-Japan yield differential, adding further downward pressure on the JPY. This dynamic helped the USD/JPY pair stall its retracement slide from a multi-month peak reached last Friday.
Fed’s Hawkish Shift and Trade Tariff Uncertainty Weigh on JPY
BoJ Deputy Governor Ryozo Himino stated that while there is a general expectation of rate hikes, the central bank must carefully assess domestic and international risks before proceeding. Some investors speculate that the BoJ may wait until April to assess wage growth trends before making another rate hike.
Reports suggesting that Trump’s economic team is considering a slow, gradual increase in tariffs over the coming months have further supported the USD. This news, coupled with a modest pullback in US Treasury bond yields, has helped cap the USD near its two-year peak ahead of key US economic data, such as the Producer Price Index (PPI), due later today.
Meanwhile, the Federal Reserve’s hawkish shift, combined with an upbeat US labor market report, has led to expectations that the Fed will hold rates steady through 2025, thereby supporting the USD against the JPY.
USD/JPY Technical Outlook: Bulls Eye 158.00 Mark
From a technical perspective, the USD/JPY pair has shown resilience just below the 157.00 level, with positive indicators on the daily chart favoring bullish traders. A failure to sustain momentum near the 158.00 round figure suggests that investors should wait for a decisive move above this level before positioning for further gains.
If the pair breaks through 158.00, it could target the 158.55 resistance level, followed by the multi-month high near 158.85-158.90. Additional buying pressure above 159.00 would open the door to further upside, potentially pushing the pair towards the psychological 160.00 mark.
On the downside, the 157.00-156.90 zone is expected to act as strong support. Any dip towards the 156.25-156.20 range, or last week’s swing low, may present a buying opportunity. A break below 156.00, however, could shift the near-term bias in favor of bearish traders, potentially triggering a more significant corrective decline.
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