- The USD/JPY price analysis indicates rising demand for the safe-haven yen.
- Uncertainty over trade deals dampened risk appetite.
- Goldman Sachs believes the Fed will deliver three 25-bps rate cuts this year.
The USD/JPY price analysis indicates rising demand for the safe-haven yen amid fiscal and trade uncertainty. At the same time, the dollar weakened due to increasing expectations for Fed rate cuts this year.
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The yen surged on Tuesday as fiscal concerns in the US prompted traders to seek safety. Market participants are concerned about Trump’s huge tax-cut and spending Bill. If it passes, it will add to the country’s debt burden.
At the same time, uncertainty over trade deals dampened risk appetite. As a deadline for reciprocal tariffs approaches, most countries have yet to sign deals with the US. On Monday, Trump complained that Japan had refused to import rice from the US, despite having a shortage. Moreover, he warned of letters announcing high tariffs to partners who would not agree to the US’s trading conditions.
Elsewhere, the dollar was fragile as markets increasingly bet on Fed rate cuts. The impact of tariffs on the US economy so far has been muted. However, the labor market has slowed down significantly. As a result, Goldman Sachs believes the Fed will deliver three 25-bps rate cuts this year.
Meanwhile, economists expect further softness in the upcoming nonfarm payrolls report. This could put more pressure on the Fed to cut interest rates.
USD/JPY key events today
- BOJ Governor Ueda Speaks
- Fed Chair Powell Speaks
- ISM Manufacturing PMI
- JOLTS Job Openings
USD/JPY technical price analysis: Bears eye 142.55 after trendline breakout
On the technical side, the USD/JPY price has made a milestone move, breaking below its shallow bullish trendline. At the same time, the price trades well below the 30-SMA. Meanwhile, the RSI is approaching the oversold region, indicating a strong bearish bias.
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The downtrend started after a sharp reversal at the 148.02 key level. Bears pushed the price below the 30-SMA. Moreover, the price started making lower highs and lows, respecting the SMA as resistance. The recent trendline breakout has solidified the bearish bias, with the next target at the 142.55 support level.
After such a steep decline, USD/JPY might pause at 142.55. However, the bearish bias will remain as long as the price stays below the SMA. A break below 142.55 would increase the downside potential.
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