The USD/JPY pair continues to face strong resistance near the 156.00 mark as it navigates through a complex web of shifting economic policies and global trade tensions. The pair's movements reflect a broader narrative involving the Bank of Japan's (BoJ) monetary strategies, interest rate differentials, and evolving trade policies spearheaded by the United States. As Japan's Finance Minister Katsunobu Kato announced monitoring the impact of potential tariffs imposed by the US, market participants remain vigilant about the Japanese Yen's future trajectory. Meanwhile, a positive shift in risk sentiment, spurred by US President Donald Trump's decision to delay tariffs on Canada and Mexico, has revitalized the US Dollar against the Yen.
The Japanese Yen, one of the world's most traded currencies, has been grappling with depreciation pressures since 2013. This trend was primarily driven by the BoJ's ultra-loose monetary policy, which resulted in a significant policy divergence between Japan and other major economies' central banks. As the BoJ embarked on a gradual reversal of this policy stance in 2024, coupled with interest rate cuts in other major central banks, the differential narrowed, offering some respite for the Yen.
In recent trading sessions, the USD/JPY pair has seen renewed upside momentum, bolstered by the strengthening US Dollar. The currency pair rebounded towards 155.50 during Tuesday's Asian session, reflecting market dynamics shaped by evolving global events. Despite this upward movement, the pair confronts formidable resistance at the 156.00 level. However, should this support be breached convincingly, it could accelerate a decline towards the 153.00 mark, further descending to the 152.60-152.55 region and eventually the 152.30 area.
The 100-day Simple Moving Average (SMA) has emerged as a crucial support level for spot prices, providing a foundation amid market fluctuations. Additionally, concerns over possible US tariffs targeting Japan have further undermined the Yen, contributing to its depreciation against the US Dollar. These developments come at a time when Japan's Finance Minister Katsunobu Kato emphasized the government's commitment to closely monitoring the potential economic fallout from such tariffs.
The widening interest rate differential between 10-year US and Japanese bonds has also played a pivotal role in favoring the US Dollar over the Yen. The US economy's relative strength, as indicated by the Institute of Supply Management's (ISM) Manufacturing Purchasing Managers' Index climbing from 49.3 to 50.9 in January, has further bolstered investor confidence in the Dollar. This positive sentiment contrasts with Japan's economic landscape, where the BoJ's policy decisions continue to influence market dynamics.
Historically, the Japanese Yen has been perceived as a safe-haven currency during times of global uncertainty. Despite this status, the BoJ has intervened directly in currency markets on occasion to lower the Yen's value, albeit sparingly due to potential political concerns from its main trading partners. The divergent expectations between the BoJ and the Federal Reserve should help contain losses for the Yen, but ongoing geopolitical developments and economic policies remain key factors in determining its future trajectory.