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The Japanese Yen gains traction amid rising trade tensions that fuel safe-haven demand.
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Optimism over a potential US-Japan trade deal and expectations of a BoJ rate hike support the JPY.
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The US Dollar and USD/JPY pair remain under pressure due to dovish Fed outlook.
The Japanese Yen (JPY) is gaining traction and edging back toward a multi-month high against the US Dollar (USD) as European markets open on Wednesday. Renewed concerns over escalating US-China trade tensions—particularly fallout from US President Donald Trump's tariff policies—are driving safe-haven flows, boosting demand for the Yen. Hopes for a US-Japan trade agreement are further supporting the JPY.
Adding to the bullish sentiment, Japan's core machinery orders posted a sharp rebound in February, beating forecasts with a 4.3% rise. This marks a significant turnaround from January’s 3.5% decline, reflecting strengthening business confidence. Notably, manufacturing orders climbed 3%, while non-manufacturing orders surged 11.4%, pointing to robust domestic investment momentum. This optimism, alongside expectations that the Bank of Japan (BoJ) will hike interest rates in 2025, continues to underpin the JPY.
A Confluence of Fundamental Drivers Supports the JPY
- President Trump’s shifting stance on trade continues to inject uncertainty into global markets. Over the weekend, the administration exempted key electronics from tariffs and hinted at possible leniency for the auto sector. However, further tariffs targeting semiconductors and pharmaceuticals are reportedly on the table.
- Amid these developments, traders are increasingly betting on diverging central bank paths: the BoJ is expected to maintain a hawkish bias, while the Federal Reserve is anticipated to cut rates by up to 100 basis points this year. The recent sell-off in US Treasuries underscores waning investor confidence in the US economy, further weighing on the USD.
- Additionally, upbeat comments from both President Trump and Treasury Secretary Scott Bessent regarding US-Japan trade negotiations have fueled optimism for a bilateral deal—another factor strengthening the Yen.
- All eyes now turn to Fed Chair Jerome Powell’s speech later today for clarity on the US monetary policy outlook. Alongside this, upcoming US Retail Sales data may trigger short-term moves in the USD/JPY pair.
Technical Outlook: USD/JPY Faces Pressure Near Key Support
Technically, the USD/JPY remains locked in a multi-month downtrend, with momentum indicators deeply negative on the daily chart. The pair is hovering near key support in the 142.25–142.20 zone, just above last week’s low around 142.00. A decisive break below this level would reaffirm the bearish trend and could open the door to further declines.
On the upside, recovery attempts may face resistance around 143.00, with additional selling pressure likely near 143.60 and 144.00. A clean break above 144.00 could trigger short-covering, pushing the pair toward the 144.45–144.50 zone and possibly the 145.00 psychological level. Continued momentum might then target the 145.50 and 146.00 levels.
