- The Japanese yen backward in the midst of concerns that Trump’s tariffs would affect the Japan industries.
- Divergent policy expectations between the BOJ and the Fed should limit deeper losses for low performance JPY.
- Operators could also refrain from aggressive bets before the Trump tariffs.
The Japanese Yen (JPY) struggles to capitalize on the modest profits of the previous day against his US counterpart and attract new sellers during the Asian session on Wednesday. However, the USD/JPY torque remains confined in a range maintained since the beginning of this week, since operators expect a new catalyst before positioning themselves for the next section of a directional movement. Therefore, the attention will remain focused on the announcement of reciprocal tariffs of US President Donald Trump later today.
Meanwhile, speculation that an economic deceleration driven by tariffs could force the Bank of Japan (BOJ) to maintain stable politics for the moment undermine JPY. However, investors seem convinced that the BOJ will continue to increase interest rates in expanding inflation signals in Japan. This marks a great divergence compared to the growing acceptance that the Federal Reserve (Fed) will resume its rate cuts cycle in June and should support the low -performance JPY.
Japanese Yen bullies remain on the margin in the midst of market anxiety for Trump’s reciprocal tariffs
- Asian shares markets followed the profits of the previous night on Wall Street before the imminent announcement of reciprocal tariffs of US President Donald Trump on Wednesday, undermining Japanese and in Japanese as a safe refuge.
- Meanwhile, Trump faded the hopes that tariffs were limited to a smaller group in countries with the greatest commercial imbalances and said Sunday that the so -called reciprocal tariffs would essentially include all nations.
- In addition, the concerns that the new tariffs would have a high range impact on the main industries of Japan forced investors to reduce their expectations that the Bank of Japan would increase the policy rate at a faster rate.
- However, incoming macroeconomic data, including solid inflation data to Tokyo consumer published last Friday, keep the door open to more increases in interest rates on the part of the BOJ and help to limit deeper losses for the JPY.
- The Federal Reserve, on the other hand, is in an awkward position due to the increase in prices and the slowdown in business activity, which implies that the economy could be heading towards stagflation.
- The concerns were fueled more due to data that showed that the manufacturing sector was first contracted in three months and that inflation at the factory door jumped at the highest level in almost three years.
- In fact, the purchasing managers index (PMI) ISM fell to 49 from 50.3 in February. In addition, the employment index highlights a decrease in payrolls in the sector at an accelerated pace.
- In addition to this, the work and labor rotation offers survey (Jolts) revealed that the number of job offers on the last business day of February stood at 7.56 million, below the 7.76 million in January.
- The markets are currently valuing the possibility that the FED reduces the indebtedness costs at 80 basic points by the end of this year, which does not help the US dollar attract significant buyers.
- Meanwhile, divergent expectations between the BOJ and the Fed could further reduce the rate differential between Japan and the US.
- The operators now wait for the US economic agenda on Wednesday, which includes the ADP report on employment in the private sector and factory orders, to obtain a new impulse before the Trump tariffs.
The USD/JPY needs to move beyond the area of ​​150.25, or the weekly maximum so that the bulls take control in the short term
From a technical perspective, the USD/JPY torque has shown resistance below the single mobile average (SMA) of 100 periods from the beginning of this week. The subsequent upward movement could favor bullish operators, although neutral oscillators justify a certain caution. In addition, the recent rupture below an ascending channel of several weeks makes it prudent to expect a strong tracking purchase before positioning for significant profits.
Meanwhile, the weekly maximum, around the area of ​​150.25, could act as an immediate obstacle. A sustained strength could raise the USD/JPY torque beyond the obstacle of 150.75-150.80, towards the level of 151.00. This is followed by the monthly March of March, around the region of 151.30 and an SMA of 200 days technically significant, currently located near the 151.60 zone, above which cash prices could recover the level of 152.00 and climb even more towards the region of 152.45-152.50 on route to the 100-day SMA, around the round figure of 153.00.
On the other hand, the SMA of 100 periods in the 4-hour graph, currently around the area of ​​149.30-149.25, followed by the level of 149.00 and the region of 148.70, or the weekly minimum, could offer support to the USD/JPY pair. However, a convincing rupture below will be seen as a new trigger for bearish operators and will make cash prices vulnerable to resume a well -established bearish trend observed during the last three months approximately.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
