The popular USD/JPY currency pair is currently fighting to keep its head above water as it faces an avalanche of headwinds. A recent report indicating the potential for additional tariffs from the United States has contributed to a volatile trading environment, particularly following a disappointing US Nonfarm Payrolls (NFP) report. This confluence of factors pushed the USD to a near two week low. Traders and analysts are further worried about the pair’s near term direction.
Additionally, on Thursday the USD/JPY experienced a significant downturn. It crashed over 100 pips from an intraday peak near 147.70. This quick turnaround is a reminder of how that market can be – extremely choppy and unpredictable. Traders are on high alert with every economic indicator and new geopolitical development. Immediate support for the pair comes in the 146.70-146.65 area. This level coincides with the 200-period Simple Moving Average (SMA) on the four-hour chart and 50% retracement level of July’s upswing.
The support is robust but the early indicators suggest that support could be slipping. Such a decisive break below this area would likely lead to further selling pressure on the USD/JPY. Analysts are cautioning that a break of this important support level could lead to a challenge of sub-146.00 levels. Such a development might even reveal the key psychological barrier of 145.00. Such a development would have USD/JPY bears smelling blood. They have been exerting increasing influence on the market’s movements.
That already challenging market landscape is made more difficult by speculation surrounding interest rates controlled by the Federal Reserve. Recent economic data, particularly Tuesday’s underwhelming ISM Services print and last Friday’s NFP report, have led to heightened expectations for a potential rate cut by the Fed. These moves put even more upward pressure on the USD, accelerating declines of the major currency pair, frustrating the USD’s existing downward trend.
Meanwhile, many bulls are looking for their next buying opportunity above the 148.000 level. They are still playing it close, due to the overall trend. A notable follow-through buying momentum might change market bias and perhaps raise USD/JPY towards the 148.45-148.50 area. Analysts point out that much harder resistance awaits above in the 147.75-147.80 area, which happens to be the location of the 38.2% Fibonacci retracement level.
The recent escalation of trade tensions has contributed to the swing in market sentiment as well. There were rumors that US President Donald Trump was planning to slap a new 15% tariff on all Japanese imports. This announcement caused the Yen to drop against the Dollar dramatically. This risk-on environment has so far given a short-lived reprieve for USD/JPY. Consequently, the duo was able to cut sharp intraday losses and wave back above the 147.00 level.
As the macroeconomic landscape continues to shift, Bitcoin traders are watching technical indicators like a hawk. They’re closely watching geopolitical news for further clues on the market’s trajectory. Slightly negative oscillators on the short-term and medium-term timeframes suggest that the momentum for USD/JPY may continue to weaken. In order to reverse this trend, it must find staying power above important historic levels.
Market participants must remain vigilant as the situation continues to play out. They will need to be especially focused on shifts in public sentiment, particularly with respect to the US-Japan trade talks now underway. Tariff ramifications and Federal Reserve policy will have a strong effect on USD/JPY trading direction. Look for these dynamics to be a major factor in the coming weeks.