- Summary:
- USDJPY is in a tag of war between the bearish undertones around US economic recession and impact of trade tariffs on Japan's dollar inflows.
USDJPY returned to the upside on Wednesday, gaining 0.1% to trade at 149.95 at the time of writing. The US dollar has weighed on the yen as the Japanese Government negotiates with the US Government on a potential escape route from the US reciprocal tariffs. Nonetheless the USDJPY currency pair is down by 0.6% in the last five sessions as concerns mount over likely US recession.
Japan is likely to be among the most impacted economies as the “Liberation Day” measures will likely spell out specific measures against auto imports. That could translate to reduced dollar inflows for Japan, adding downward propulsion to USDJPY.
Japan’s services PMI will be out later on Wednesday, and will inject fresh impetus to the pair. However, the US dollar will likely stay on the uptrend in the intervening period, after ADP Non-Farm Employment Change printed out at 155k, exceeding the median forecast 118k .
Meanwhile, the Bank of Japan (BoJ) is largely expected to slash interest rates in May, and that sentiment will weigh down on the yen. Japanese employers raised wages last month, helping the BoJ build a strong case for interest rate hike. US Non Farm Payrolls (NFP) figures will be out on Friday and will provide clues on the performance of the US economy under the tight tariff environment, thereby impacting the USDJPY pair.
USDJPY Prediction
The USDJPY currency pair pivots at 149.53 and the momentum favours the buyers to be in control. The upside momentum will likely meet the first barrier at 150.35, but an extended control by the buyers will break above that level and test 150.35.
On the other hand, breaking below 149.53 will shift the momentum to the downside. With the sellers in control, the first support will likely be at 149.21. The upside narrative will be invalid if the price breaks below that level. That could potentially extend to the second support at 148.84 if the downward momentum strengthens.
