The Japanese Yen (JPY) extended its intraday losses during early European trading on Tuesday, retreating further from a one-month high against the US Dollar (USD) reached earlier in the session. The slide followed reports that Japan’s Ministry of Finance may reduce its issuance of super-long government bonds, a move that sent yields on 30-year Japanese government bonds to their lowest levels since May 8.
This policy speculation, combined with improved global risk sentiment sparked by US President Donald Trump’s decision to delay imposing tariffs on the European Union, weighed on the safe-haven JPY. However, broader market unease surrounding Trump’s unpredictable trade strategies and growing concerns over the deteriorating US fiscal position kept risk appetite in check, offering some support to the Yen.
Despite Tuesday’s dip, expectations of further interest rate hikes by the Bank of Japan (BoJ) are keeping downside pressure on the Yen limited. The BoJ earlier reported that Japan’s Services Producer Price Index (PPI) rose 3.1% year-over-year in April, reinforcing last week’s strong consumer inflation data and strengthening the case for continued monetary tightening.
BoJ Governor Kazuo Ueda reaffirmed the central bank’s readiness to raise rates further if needed, particularly in light of rising food prices that risk pushing underlying inflation above the BoJ’s 2% target. His remarks helped strengthen the Yen earlier in the day, dragging the USD/JPY pair to a one-month low during the Asian session.
Finance Minister Katsunobu Kato also weighed in, noting that interest rate movements reflect market concerns about Japan’s fiscal health. He pledged ongoing communication with bond investors to ensure stability in the super-long segment of the Japanese government bond market.
Geopolitical tensions are also keeping the JPY supported. Trump’s recent comments targeting Russian President Vladimir Putin and the possibility of new sanctions following the largest drone attack in Ukraine in over three years added to risk aversion. Meanwhile, continued conflict in Gaza has further stoked safe-haven demand for the Yen.
On the US side, the Dollar attempted a modest rebound from monthly lows. However, concerns that Trump’s aggressive fiscal agenda—including sweeping tax cuts and increased spending—could further balloon the US deficit have capped USD gains. Meanwhile, markets remain cautious ahead of key macroeconomic releases and the Federal Reserve’s policy guidance.
Upcoming US data includes Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the much-anticipated release of the FOMC meeting minutes, along with the Preliminary Q1 GDP and the PCE Price Index. In Japan, Friday’s Tokyo CPI data is expected to play a pivotal role in shaping expectations for future BoJ moves.
Technical Outlook – USD/JPY:
Technically, the USD/JPY pair remains under pressure after failing to break above the 61.8% Fibonacci retracement level of the April–May rally. Momentum indicators on the daily chart remain in negative territory, suggesting further room for downside.
Initial resistance is seen near 143.65. A break above this level could push the pair toward the 144.00 mark, with a further extension possibly reaching the 144.80–145.00 zone. However, upside attempts are likely to face strong selling interest at these levels.
On the downside, immediate support lies at 143.00, followed by the 142.50–142.45 range. A decisive break below 142.00 could encourage further selling, exposing the pair to support at 141.55 and the 141.00 handle. Continued bearish momentum may eventually take the pair below the year-to-date low near the psychologically important 140.00 level, last touched on April 22.
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