USDJPY was up in the New York trading session on Wednesday, with shifting trade tariff sentiment at the center of focus. The currency pair was at 150.60 and up by 0.4% at the time of writing. That gain brought its returns in the last five sessions to 1.35%, underlining the dollar’s strong resurgence. However, there is an underlying bearish momentum as the Bank of Japan (BoJ) signals a potential interest rate hike in the second quarter of the year.
BoJ Governor Kazuo Ueda stated on Wednesday that rising wages would likely keep inflation on the ascending trajectory, necessitating an interest rate hike. However, he did not give a specific timeline for the potential hike, limiting the downside for USDJPY in the near-term.
On the other hand, the Federal Reserve seems more confident of two rate cuts this year. That seems more likely with President Donald Trump being open to negotiations on reciprocal trade tariffs. Lower tariffs would result in lower inflation rates, creating a strong case for interest rate cuts.
Conversely, an extended paralysis in trade negotiations between the US and its leading trading partners could keep inflation elevated, adding propulsion to the USDJPY pair. US Core Personal Consumption Expenditure (PCE) figures will be out on Friday, and will provide clues on the inflation trajectory and help assess the likelihood of an interest rate cut in the second quarter.
USDJPY pivots at 150.21 and action above that level signals control by the buyers. The currency pair will likely meet its first resistance at 150.80, but a stronger upward momentum will clear that hurdle and test the next resistance at 151.24.
On the other hand, the momentum will go toward the downside if the pair breaks below 150.21. That will likely see the first support come at 149.83. The upside narrative will be invalid if action breaks below that level. In addition, the resulting momentum could extend the decline to test 149.50.
This post was last modified on Mar 26, 2025, 17:48 GMT 17:48