The Asian trading session on Thursday saw the Japanese Yen (JPY) rally gagnant. Propping up this move were safe-haven flows from traders, playing it safe as they await some major strides on the economic front. The longer the current U.S. government shutdown continues, the greater the economic risks become. Consequently, the USD/JPY currency pair is coming under increasing pressure and increasing market uncertainty. As investors await the Bank of Japan’s (BoJ) policy update, the momentum for USD/JPY appears constrained, with immediate resistance levels coming into play.
Fundamentally, economic worries from the impending U.S. government shutdown are weighing heavily on the USD/JPY pair. It’s recovered furiously from the mid-151.00s support zone. Note—this recovery is better, but it’s still at risk. On the downside, if the pair decisively falls under the 151.55 to 151.50 area, a drop might ensue. Such a movement would move the pair into even greater upside danger, making traders more inclined to step back.
Given how much the market is looking forward, the 153.00 psychological level is the first test in the way of USD/JPY. A clean break above this level would indicate more upward movement is coming. This is all the more valid, should the fortunate duo manage to exceed just above the significant resist zone between 153.25 and 153.30. If this resistance does break, USD/JPY may have some room to rally back towards the 154.00 level. It may even test the upper resistance area of 154.75–154.80.
Many analysts predict further strengthening of USD/JPY, though they think the highs will be short-lived. As always, traders are on edge and closely watching the next BoJ policy meeting. US Treasury Secretary Scott Bessent has publicly urged Japan’s government to give the BoJ sufficient space to maneuver and avoid excessive volatility in exchange rates. This call to ease monetary policy in Japan is particularly interesting in light of long-standing U.S./Japanese monetary policy tensions. Second, it means the U.S. will likely redouble its efforts on Japan to increase the pace of monetary tightening.
Compounding these dynamics is market anxiety surrounding an upcoming critical meeting between U.S. President Donald Trump and Chinese leader Xi Jinping. This meeting, coming after months of rocky trade relations, is considered by many to be crucial in setting the tone for U.S.-China economic relations going forward. This created a favorable environment for safe-haven currencies, such as the JPY, with uncertainty gripping the markets as the negotiations unfolded.
Proprietary traders thrive in dynamic market environments. In addition, they remain constantly on watch, observing economic indicators and geopolitical changes that may affect currencies. The combination of U.S. domestic issues, potential policy shifts from the BoJ, and international trade tensions are likely to keep market participants on high alert.