Trade uncertainty weakens the safe-haven appeal of the yen, and USD/JPY is limited by the divergence of US-Japan interest rate differential expectations and the 144 resistance
2025-07-02 15:15:29
USD/JPY rose slightly before the European session on Wednesday, trading at 143.50, continuing the momentum of the rebound from 142.70 on Tuesday night. The short-term rebound was mainly driven by two aspects: first, US President Trump increased pressure on Japan, weakening the safe-haven demand for the yen; second, the dollar stabilized driven by slightly better-than-expected employment and manufacturing data.
Trump said on Tuesday that if Japan does not increase imports of American products, the United States may impose tariffs of 30% to 35% on Japanese goods, higher than the 24% announced on April 2. This statement made the market worry that the US-Japan trade relations would deteriorate, thereby weakening the safe-haven asset status of the yen and triggering short-term selling pressure.
Japan: Although Japan's CPI has exceeded 2% for three consecutive years, the Bank of Japan still insists on a "gradual" exit from easing. Governor Kazuo Ueda said that core inflation is still unstable and whether to raise interest rates still depends on wages and expectations. New policy committee member Kazuyuki Masuda also pointed out that economic risks still exist and the Bank of Japan should not rush to raise interest rates.
In the United States: Fed Chairman Powell admitted that interest rates would have been cut if it were not for trade uncertainties, and did not deny the possibility of a rate cut in July. Market pricing shows that the probability of a rate cut in September is more than 75%.
The US data was slightly better but failed to reverse the weakness of the US dollar: the ISM manufacturing PMI rebounded slightly to 49, which was below the boom-bust line but better than expected; the JOLTS job vacancies reached 7.769 million, higher than the previous value and expectations, indicating that the labor market is still resilient. The market focuses on this week's ADP and non-farm payrolls data to determine the Fed's interest rate cut path.
The short-term technical chart (4-hour chart) shows that both the RSI and MACD momentum indicators are in a neutral to bearish zone, and the exchange rate rebound lacks sustainability; the current rebound resistance is in the 144.00 to 144.35 range, the latter being the 200-period moving average; if the horizontal resistance of 144.65 is broken, it is expected to test the 145.00 psychological barrier.
The support levels below are: 143.40 to 143.35 area (the lower edge of the current consolidation range); 143.00 integer; 142.70 to 142.65 area (this week's low); if broken, it will open up the space to fall to the May low of 142.15 to 142.10, or even the 140.80 to 141.00 area.
Editor's comments:
USD/JPY is currently in a volatile pattern. Although the yen has weakened due to the pressure from Trump's attitude towards Japan, the market is still supportive of Japan's expectations of a rate hike in 2025, and the momentum of yen shorts is limited.
On the other hand, the dollar is limited by the expectation of interest rate cuts, and its further upside space is limited. From a technical perspective, 144.00 to 145.00 is the key challenge area for bulls. If it fails to break through effectively, the exchange rate will return to the oscillation range around 142 or even go down. Pay close attention to the non-farm payroll data on Thursday, as its performance will directly affect whether the Fed will turn ahead of schedule in July.
Trump said on Tuesday that if Japan does not increase imports of American products, the United States may impose tariffs of 30% to 35% on Japanese goods, higher than the 24% announced on April 2. This statement made the market worry that the US-Japan trade relations would deteriorate, thereby weakening the safe-haven asset status of the yen and triggering short-term selling pressure.
Japan: Although Japan's CPI has exceeded 2% for three consecutive years, the Bank of Japan still insists on a "gradual" exit from easing. Governor Kazuo Ueda said that core inflation is still unstable and whether to raise interest rates still depends on wages and expectations. New policy committee member Kazuyuki Masuda also pointed out that economic risks still exist and the Bank of Japan should not rush to raise interest rates.
In the United States: Fed Chairman Powell admitted that interest rates would have been cut if it were not for trade uncertainties, and did not deny the possibility of a rate cut in July. Market pricing shows that the probability of a rate cut in September is more than 75%.
The US data was slightly better but failed to reverse the weakness of the US dollar: the ISM manufacturing PMI rebounded slightly to 49, which was below the boom-bust line but better than expected; the JOLTS job vacancies reached 7.769 million, higher than the previous value and expectations, indicating that the labor market is still resilient. The market focuses on this week's ADP and non-farm payrolls data to determine the Fed's interest rate cut path.
The short-term technical chart (4-hour chart) shows that both the RSI and MACD momentum indicators are in a neutral to bearish zone, and the exchange rate rebound lacks sustainability; the current rebound resistance is in the 144.00 to 144.35 range, the latter being the 200-period moving average; if the horizontal resistance of 144.65 is broken, it is expected to test the 145.00 psychological barrier.
The support levels below are: 143.40 to 143.35 area (the lower edge of the current consolidation range); 143.00 integer; 142.70 to 142.65 area (this week's low); if broken, it will open up the space to fall to the May low of 142.15 to 142.10, or even the 140.80 to 141.00 area.
Editor's comments:
USD/JPY is currently in a volatile pattern. Although the yen has weakened due to the pressure from Trump's attitude towards Japan, the market is still supportive of Japan's expectations of a rate hike in 2025, and the momentum of yen shorts is limited.
On the other hand, the dollar is limited by the expectation of interest rate cuts, and its further upside space is limited. From a technical perspective, 144.00 to 145.00 is the key challenge area for bulls. If it fails to break through effectively, the exchange rate will return to the oscillation range around 142 or even go down. Pay close attention to the non-farm payroll data on Thursday, as its performance will directly affect whether the Fed will turn ahead of schedule in July.
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