- Japanese Yen is higher than a weak USD for the third straight day on Monday.
- JPY benefited from divertist BOJ-Fed Policy expectations and reserved demand.
- Expectations for the US-Japan trade deal support the JPY and weigh the USD/JPY pair.
The Japanese Yen (JPY) on Monday maintains a positive bias against the widely weak US dollar (USD) through the Asian season and is underlined by a combination of factors. Investors are confident that the Bank of Japan (BOJ) will continue to increase interest rates amid wide inflation in Japan. In addition, a final American-Japanese trade deal and global flight for security are expected to outlines JPY.
Market spirit remains delicate on the back of business uncertainties, concerning concerns about rising geopolitical stress, and deteriorating American fiscal concerns, which in turn see traditional safe-heven assets including JPYs. On the other hand, the US dollar (USD) is depressed between bets to cut higher rates by the Federal Reserve (Fed). This is a larger deviation compared to Hawkish Boj Expectations and in favor of JPY Bulls.
Japanese yen bulls maintain control between boj rate and revives safe-horn demand demand
- The Tokyo Consumer Price Index (CPI) has crossed the 2% target of Bank of Japan for three straight years and pointed to sticky food inflation on Friday. This can add pressure on BOJ to increase interest rates again, which reduces the demand for Japanese yen.
- Japan’s top trade -conversation Riii Akajwa said that the latest round of discussion with the Trump administration on Tariff has put him on a trade deal earlier this month. Akajwa said that the two sides would re -meet the group of the summit of seven leaders.
- US President Donald Trump said on Friday that he was going to double tariff on steel imports from 25% to 50%. Earlier, Trump said in China, saying that China has violated its trade deal with the US. A federal appeal court increased after Trump restored the tariff.
- Ukraine on Sunday launched one of its biggest drone attacks on Russia, destroying five deep airports and more than 40 aircraft inside the Russian region. Meanwhile, Russia enhanced Ukraine with missiles and drones a few hours before a new round of direct peace talks in Istanbul.
- Israel continued his tireless bombing of the Gaza Patti, while Yemen’s Houthi rebels claimed responsibility for the oilworks missile attack, which was intercepted at Ben Gurian Airport near Tel Aviv. It holds geopolitical risk in the game and benefits safe-heaven JPY.
- Meanwhile, the US Personal Consumption Expenditure (PCE) Price Index cooled from 2.3% to 2.1% yoy rate in April last month. In addition, the core PCE Price Index, which excludes unstable food and energy prices, increased 2.5% in March than 2.7%.
- Data confirmed expectations that the Fed would cut its target for short -term lending costs in September. Traders are also pricing in the possibility of cutting second rate in December. It puts the US dollar sales and further pressure on the USD/JPY pair.
- Investors are now set at the beginning of a new month for the important American macro release of this week, which began with ISM manufacturing PMI later this Monday. In addition, the appearance of Fed Chair Zerome Powell will be seen for short -term motivation.
USD/JPY technical setup supports possibilities for the expansion of three days old downtrend
61.8% of the recent collapse from the monthly peaks, the failure of the last week near the 61.8% Fibonacci retracement level and the 200-hour-term simple moving average (SMA) is recently declined in favor of USD/JPY bear. This, with a negative oscillator on the daily/per hour chart, suggests that the least resistance to the prices of the spot remains in the negative side and supports the possibilities for deep damage. Therefore, some follow-three weakness towards the 143.00 mark, the route for the next relevant support near the 142.40 area, looks like a different possibility. The pair may eventually fall into the area of 142.10, or the monthly low touched on last Tuesday.
On the other hand, a 200-term SMA on a 4-hour chart, currently ahead of the 144.00 round figure, can now act as an immediate strong barrier. After this, 144.25–144.30 supply area is closely followed, above which the USD/JPY pair can aim to recover the 145.00 psychological mark. A continuous strength beyond the latter was touched 146.00 round figure and 146.25–146.30, or the top of the two weeks on the last Thursday.
Bank of japan
Bank of Japan (BOJ) is a Japanese central bank, which determines monetary policy in the country. Its mandate is to issue banknotes to ensure value stability and to do currency and monetary control, which means a inflation target of about 2%.
Bank of Japan entered an ultra-lux monetary policy in 2013 to stimulate the economy and fuel inflation amid low-affected environment. The bank’s policy is based on quantitative and qualitative spontaneity (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled on its strategy and loosen the policy by starting negative interest rates and then directly by controlling the yield of its 10 -year government bonds. In March 2024, BOJ removed the interest rates, effectively the ultra-lux withdrawn from the monetary policy trend.
The bank’s massive excitement depreciated Yen against its main currency peers. The process increased due to increasing policy deviations between Japan and other main central banks in 2022 and 2023, which opted to rapidly increase interest rates to fight decades-high levels of inflation. The BOJ policy created a widespread difference with other currencies, with the value of the yen down. The trend was partially reversed in 2024, when BOJ decided to give up its ultra-lux policy attitude.
Spikes in a weak yen and global energy prices led to an increase in Japanese inflation, which crossed the 2% target of BOJ. Possibility of increasing salary in the country – a major element promoting inflation – also contributed to this step.
