The Japanese Yen (JPY) remains under pressure during Wednesday’s Asian session, with the USD/JPY pair maintaining intraday gains above the 143.00 level. A modest rebound in the US Dollar, coupled with a boost to global risk sentiment from the announcement of US-China trade talks in Switzerland, is weakening demand for the JPY, traditionally seen as a safe-haven asset. The USD benefits from repositioning ahead of the Federal Reserve’s upcoming policy decision.
The Federal Reserve is set to announce its decision at the conclusion of a two-day policy meeting later today, and investors will be closely watching for any signals on future rate cuts. These clues are expected to influence USD price dynamics and potentially offer new momentum to the USD/JPY pair. However, despite the current weakness in the JPY, the market is also considering the possibility of the Bank of Japan (BoJ) raising interest rates further in 2025, amid rising inflation in Japan, cautioning against overly bearish JPY positions.
US-China Trade Talks Undermine Safe-Haven Demand for JPY
The mood in global markets was lifted this week with the announcement of upcoming US-China trade talks in Switzerland. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are set to meet with Chinese Vice Premier He Lifeng, fueling optimism about potential trade deals. This has contributed to reduced demand for the Japanese Yen, which typically benefits during times of heightened geopolitical tensions, as risk appetite grows globally.
As a result, the US Dollar has gained traction, recovering from a three-day losing streak, as traders reposition themselves ahead of the Federal Reserve’s policy announcement. The USD/JPY pair has edged above the 143.00 mark as investors await clarity on the Fed‘s stance.
Fed Meeting to Influence USD/JPY Direction
The Federal Reserve is widely expected to keep interest rates unchanged at the end of today’s policy meeting. However, attention will be focused on the accompanying statement and comments from Fed Chair Jerome Powell during the post-meeting press conference, which could offer insights into the Fed’s future rate-cut trajectory. Any indication of a shift in monetary policy could provide fresh momentum to the USD/JPY pair.
At the same time, the Bank of Japan’s stance on rate hikes remains a key factor. The BoJ has emphasized its commitment to raising rates if inflation continues to meet its targets, and there are expectations that rising wages and increased consumer spending could drive further monetary tightening in Japan later this year.
Geopolitical Risks Limit JPY Decline
While the global risk sentiment is improving, ongoing geopolitical tensions keep some upward pressure on the JPY. A Kremlin spokesperson warned of an immediate response if Ukraine does not halt its fire, while Israel’s security Cabinet has approved a plan to expand its military offensive in Gaza. These developments could prevent the Yen from weakening too rapidly, adding caution to the market.
Technical Analysis: USD/JPY Faces Resistance at 143.55-143.60
From a technical perspective, the USD/JPY pair faces resistance near the 143.55-143.60 zone. A failure to break above this level could open the door for further downside, with the pair likely to encounter selling pressure around the 144.00 mark. If the pair clears this resistance, however, it could trigger a short-covering rally, pushing the pair toward the 145.00 psychological level.
On the downside, the 142.35 region, which marks the weekly low, offers immediate support. A break below this level could accelerate the decline, potentially bringing the pair toward the 142.00 mark, followed by support near 141.60-141.55 and the 141.00 round figure.
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