The Japanese Yen (JPY) weakened for a second consecutive day on Monday, nudging the USD/JPY pair to around 144.75 during the Asian session, though gains lacked strong momentum. Market sentiment remains cautious ahead of Tuesday’s pivotal Bank of Japan (BoJ) policy meeting, with investors balancing expectations that the BoJ may pause further rate hikes this year against an increasingly positive equity market environment that undermines the Yen’s safe-haven appeal.
The BoJ is reportedly considering a plan to halve its purchases of Japanese government bonds starting April 2026—a proposal expected to gain majority support during the two-day meeting commencing Monday. Despite anticipation that the central bank will hold its benchmark interest rate steady at 0.5%, policymakers acknowledge inflation pressures are slightly stronger than earlier forecasts, hinting at possible future tightening.
Rising geopolitical tensions in the Middle East add complexity to the outlook. Following Israel’s Friday strikes on Iranian nuclear sites and key personnel—deemed necessary to counter an existential threat—Iran retaliated with hundreds of drones over the weekend, warning of further reprisals. This escalation fuels demand for safe-haven assets like the Yen, limiting deeper losses.
Meanwhile, the US Dollar struggles to attract strong buying interest, hovering near a three-year low set last week. Persistent trade uncertainties and market expectations of Federal Reserve rate cuts in 2025 weigh on the greenback. Investors now turn their focus to the BoJ’s decision Tuesday and the Federal Open Market Committee’s (FOMC) policy announcement Wednesday for fresh direction.
From a technical perspective, USD/JPY faces resistance near 144.75, aligned with the upper boundary of a multi-week trading range. A decisive break above the 145.00 psychological barrier could trigger bullish momentum, propelling the pair toward the monthly swing high at approximately 145.45. Success beyond this level may open the door to 146.00 and further gains toward the May 29 peak around 146.25-146.30.
On the downside, support lies near 144.00, with buyers expected to defend the 143.55-143.50 zone. A break below this could see USD/JPY slide to the 143.00 mark, potentially testing Friday’s low near 142.80-142.75 and the range’s lower boundary in the mid-142.00s. Failure to hold these supports may signal a resumption of the downtrend from May’s monthly high.
As the market awaits crucial central bank guidance amid intensifying geopolitical risks, the USD/JPY pair’s near-term trajectory remains finely balanced between these technical and fundamental factors.
