The Japanese Yen (JPY) is under intense market pressure. On Tuesday, it fell below that key 145.00 line, in response to a mildly stronger US Dollar (USD). The USD/JPY currency pair is on fire, in a very bullish way. It might make it up to the 146.25-146.30 area, possibly to the top made on May 29th. Expectations are building that the Bank of Japan (BoJ) will pause on at least one more rate hike this year. This new uncertainty is putting further pressure on the strength of the Yen.
According to market analysts, USD/JPY pair has convincingly broken down through the critical psychological level of 145.00. This decline reflects a deeper, long-lasting change in investor psychology. Markets are on edge as they prepare for a new era in the monetary policy outlook. This surge in volatility occurs just before the all-important two-day FOMC meeting scheduled for next Wednesday. The Federal Reserve’s latest update on monetary policy is expected to provide insights into future interest rate trajectories, impacting both the USD and JPY.
In the present trading climate, the USD/JPY pair might find support near the 144.50-144.45 zone. On a technical basis, it is approaching the psychologically significant level at 144.00. If the negative momentum continues, it will proceed to the initial support areas (143.55-143.50) as intermediates. Beyond that it might be able to reduce further the important mentally significant round number of 143.00, with last Friday’s swing low around 142.80-142.75.
In addition, geopolitical tensions in the Middle East are escalating. Such tensions would likely have a major impact on the USD/JPY pair’s bullish momentum. Such tensions risk capping deeper safe-haven JPY gains, forming a tricky backdrop for JPY-focused currency traders. JPY bears may be reluctant to step out in front of aggressive positioning. They would like to see the important policy judgement from the BoJ on monetary policy come first.
Japan’s Finance Minister Katsunobu Kato on the shifting state of play in global diplomacy. He disclosed that talks with US Treasury Secretary Scott Bessent still have not produced a final consensus on an acceptable trade package. This added uncertainty is further complicating the picture behind the USD/JPY pair’s movements.
Ishiba admitted that the two sides remain far apart on several important issues. Consequently, they have failed to come to a compromise on the overall trade package thus far.
That’s one reason why recent technical analysis has found the daily chart for the USD/JPY pair to be absolutely humming with activity. Oscillators recently started receiving positive momentum. If the strength can be sustained above the 145.00 figure, this would be an early sign of a bullish breakout from a multi-week trading range. Traders will be looking to this like a hawk for further clues.
Yet market sentiment is jittery against a backdrop of rising conviction that the US Federal Reserve will hold off on any cuts in borrowing costs until 2025. This expected transition in leadership may pose problems for the USD. Consequently, it could put a lid on further bullish moves for the USD/JPY currency pair in the short term.