The USD/JPY currency pair has retreated toward the critical 145.00 level after failing to sustain momentum above 146.20, a near one-month high reached earlier in the trading session. The correction reflected growing concerns over the US economic outlook and upcoming trade talks.
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USD/JPY Price Action Influenced by US Dollar Weakness
The USD/JPY pair’s performance was largely driven by broad-based US dollar weakness as markets began to reassess recent developments:
- The currency pair now hovers around 145.00, down from 146.20 earlier.
- The US Dollar Index (DXY) dropped to 100.30 after peaking at 100.86.
- Investors are increasingly skeptical about the US-UK trade deal.
- The focus is now on the US-China trade talks scheduled for this weekend in Switzerland.
Japanese Yen Finds Support From Positive Economic Data
While USD/JPY has been under pressure, the Japanese Yen has been supported by positive domestic economic indicators:
- Japan’s March Overall Household Spending surged 2.10% year-over-year.
- This figure significantly outperformed market expectations of 0.20%.
- The strong consumer spending data marks a decisive reversal from the previous month’s 0.50% decline.
- The improving economic performance could ease pressure on the Bank of Japan (BoJ) to intervene in the currency market.
US Economic Concerns Weigh on USD/JPY Outlook
The USD/JPY correction coincides with mixed signals from the US economy and warnings from Federal Reserve officials:
- Fed Governor Barr warns of stagflation risks due to the impact of increased tariffs.
- These trade measures could increase inflation while slowing economic growth.
- Despite concerns, the Atlanta Fed GDPNow model maintains a Q2 growth estimate of 2.30% SAAR.
- Market sentiment remains cautious due to the risk of escalating trade tensions.
USD/JPY Technical Analysis Points to Bearish Momentum
Technically, USD/JPY is sending out several bearish signals that traders should watch:
- The current trading level near 145.00 indicates continued selling pressure.
- The 50-day EMA at 146.16 and the 50-day SMA at 146.31 provide significant resistance.
- Longer-term moving averages (100-day SMA at 150.46 and 200-day SMA at 149.57) remain in sell territory.
- The 20-day SMA at 143.17 offers potential support if selling accelerates.
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Key USD/JPY Support and Resistance Levels to Watch
Traders following the USD/JPY pair should closely monitor these crucial price levels:
- Support Levels: 144.82 (immediate support), 144.79 (secondary support), 144.49 (strong support zone).
- Resistance Levels: 146.16 (immediate resistance), 146.31 (key resistance barrier), 148.30 (major resistance).
A sustained break below 144.80 could trigger further downside movement in the Dollar-Yen pair. Conversely, recovery above 146.30 would be necessary to confirm any bullish reversal scenario.
USD/JPY traders should keep a close eye on upcoming economic data releases as well as the outcome of trade talks – factors that could determine the direction of the pair in the short term.
