The Japanese Yen (JPY) extended its gradual intraday decline on Friday, bolstered by renewed US Dollar (USD) buying, pushing the USD/JPY pair toward the 144.00 level as European markets opened. Disappointing Japanese Household Spending data, combined with a fourth consecutive month of falling real wages and ongoing global trade concerns, continue to weigh on the safe-haven Yen. These factors complicate the Bank of Japan’s (BoJ) plans to normalize monetary policy and, alongside optimism over renewed US-China trade negotiations, keep downward pressure on the JPY.
Despite the Yen’s weakness, market participants still anticipate that the BoJ may raise interest rates later this year amid broadening inflationary pressures in Japan. Persistent geopolitical risks further temper market optimism, likely limiting more severe losses for the Yen. Meanwhile, modest USD gains ahead of the key US Nonfarm Payrolls (NFP) report reflect cautious repositioning amid expectations of further Federal Reserve rate cuts. Concerns over the US fiscal deficit also act as a ceiling for the Greenback’s advance and, by extension, the USD/JPY pair.
Government data released Friday revealed Japan’s Household Spending unexpectedly declined by 0.1% year-over-year in April, reversing a 2.1% rise the previous month. Monthly spending fell 1.8%, exceeding forecasts. Moreover, real wages contracted for the fourth straight month in April as inflation outpaced pay increases, threatening private consumption, which accounts for over half of Japan’s GDP, and raising recession risks.
In Washington, the US Treasury Department’s recent exchange-rate report urged the BoJ to continue monetary tightening to support a healthier exchange rate and enable structural trade adjustments. Meanwhile, Japan signaled a softer stance on the 25% US auto tariff, proposing a flexible framework for reductions based on contributions to the US auto industry. Japanese tariff negotiator Ryosei Akazawa is currently engaged in talks with US officials.
Further bolstering market sentiment, US President Donald Trump and Chinese President Xi Jinping held a phone call on Thursday, agreeing to resume trade negotiations soon. Trump described the discussion as highly positive and focused on trade issues.
The USD remains near its lowest level since April 22, pressured by growing expectations of a Fed rate cut in September. Traders appear cautious about aggressive USD/JPY bets ahead of today’s NFP release.
Technical Outlook:
The USD/JPY pair has traded within a defined range this week, forming a rectangle pattern on the daily chart—a consolidation phase that leans bearish following May’s low. Negative oscillators suggest downside bias, indicating that any rally toward the 144.00 resistance level may attract selling pressure.
Beyond 144.00, the pair faces resistance near 144.40, coinciding with the 100-period Simple Moving Average on the 4-hour chart. A decisive break above this could pivot momentum in favor of bulls, targeting the psychological 145.00 mark.
On the downside, support lies at 143.50-143.45, with potential buying interest near 143.00. A break below 142.75-142.70 could accelerate declines toward 142.10, last week’s swing low. Falling beneath that level may expose the pair to further losses toward 141.60 and possibly below 141.00.
With key economic data on the horizon, USD/JPY’s next moves will hinge on both fundamental developments and the interplay of technical support and resistance.
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