USDJPY Downside Extends As Dollar Weakness Nears Six-Month Lows

Summary:
• USDJPY has registered the fourth successive daily loss and things are about to get tougher for the dollar as China pumps pressure.

The Japanese yen keeps rising against the US dollar as the US economic outlook remains uncertain. So far, the dollar’s ability to recover lost territory has not been aided by the lessening of trade tariff concerns. At press time, the USDJPY currency was 142.80, down 0.1% at the time of writing. As China raises the stakes, US trade war against China is apparently shifting against the world’s largest economy.

In the latest development, China has banned its airlines from purchasing Boeing planes or plane parts, adding downward pressure on the US dollar. US President has announced three days ago the suspension of 145% tariffs against smartphones and electronics from China, and the Boeing decision by the Chinese government adds to the uncertainty around the greenback’s strength.

Apart from the yen, other major currencies are trending upward vs the dollar. The DXY index which weighs the dollar’s strength against six major currencies continues to be near six month lows. At the time of writing, the Index was at 99.83, and on course for the third straight session below the 100 threshold. In keeping with analysts’ projections, the Bank of Japan (BoJ) will likely raise interest rates when on April 30th.

The Federal Reserve, on the other hand, is anticipated to cut interest rates in its May meeting. Though the central bank is autonomous, US President Donald Trump has pushed it to reduce borrowing costs to relieve tariff strain on the American economy. This scenario sets up the USDJPY trading pair for an extended downward trend in the coming weeks.

USDJPY Prediction

The USDJPY trading pair currently pivots at 143.66 and the downside will prevail if resistance prevails at that level. The downward momentum will likely find its initial support at 142.10. If the sellers extend their control, the pair could go lower and test the second support at 141.00.

On the other hand, breaking above 143.66 will shift the momentum to favour the buyers. In that case, primary resistance will likely be at 144.57. A breach of that mark will invalidate the downside narrative. Also, the resulting momentum could extend gains to take action to the second resistance level at 145.45.