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- The Japanese Yen attracts some haven flows after Trump’s new tariffs on commodity imports.
- Expectations that the Fed could delay rate cuts benefit the USD and lend support to USD/JPY.
- Bets that the BoJ will hike interest rates further should continue to act as a tailwind for the JPY.
The Japanese Yen (JPY) remains on the front foot against its American counterpart through the Asian session on Tuesday, though it lacks follow-through. Worries about US President Donald Trump’s no-exemption tariffs on commodity imports effectively end deals with the European Union, the United Kingdom, Japan, and other countries. This endangers Japan’s economic stability and acts as a headwind for the JPY.
Apart from this, a modest US Dollar (USD) strength, supported by expectations that Trump’s policies would boost inflation and delay rate cuts by the Federal Reserve (Fed), acts as a tailwind for the USD/JPY pair. The downside for the JPY, however, remains cushioned in the wake of the Bank of Japan’s (BoJ) plans to hike interest rates further. Traders now look to Fed Chair Jerome Powell’s testimony for a fresh impetus.
Japanese Yen struggles to gain any meaningful traction amid mixed cues
- US President Donald Trump signed an order Monday that imposes a 25% tariff on imports of steel and aluminum into the US, fueling trade war fears and underpinning the safe-haven Japanese Yen.
- Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino recently signaled the possibility of another interest rate hike if the economy and prices align with the central bank’s projections.
- Adding to this, BoJ board member Naoki Tamura said last week policymakers need to bump up interest rates to 1% by the second half of the fiscal year beginning in April to fend off rising prices.
- Moreover, several BoJ officials are in favor of more rate hikes as inflation is weighing on consumer spending. Japan’s core consumer inflation has exceeded the BoJ’s 2% target for nearly three years.
- Meanwhile, worries that Trump’s policies would reignite inflation in the US might force the Federal Reserve to stick to its hawkish stance on the back of a still resilient US economy and labor market.
- The market focus now shifts to Fed Chair Jerome Powell’s two-day congressional testimony starting this Tuesday, which might provide cues about the rate-cut path and influence the US Dollar.
- Apart from this, the release of the latest US consumer inflation figures on Wednesday will determine the near-term USD trajectory and provide some meaningful impetus to the USD/JPY pair.
USD/JPY technical setup supports prospects for further depreciating move
From a technical perspective, the overnight failure near the 152.50 confluence support breakpoint now turned resistance, and the subsequent downtick favors bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside.
However, any further slide is more likely to find some support near the 151.30 horizontal zone ahead of the 151.00-150.90 area, or the lowest level since December 10 touched last Friday. Some follow-through selling below will reaffirm the negative bias and make the USD/JPY pair vulnerable to weaken further to the 150.00 psychological mark with some intermediate support near the 150.55 region.
On the flip side, the 152.50 confluence – comprising the 100- and the 200-day Simple Moving Averages (SMAs) – might continue to act as a strong immediate hurdle. A sustained strength beyond, however, might trigger a short-covering move and allow the USD/JPY pair to reclaim the 153.00 round figure. The recovery could extend further, though it is likely to remain capped near the 153.75 region.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.10% | 0.02% | 0.19% | 0.17% | 0.08% | 0.01% | |
| EUR | -0.07% | 0.01% | -0.08% | 0.13% | 0.10% | 0.01% | -0.05% | |
| GBP | -0.10% | -0.01% | -0.08% | 0.10% | 0.07% | -0.01% | -0.08% | |
| JPY | -0.02% | 0.08% | 0.08% | 0.19% | 0.16% | 0.08% | 0.02% | |
| CAD | -0.19% | -0.13% | -0.10% | -0.19% | -0.02% | -0.10% | -0.18% | |
| AUD | -0.17% | -0.10% | -0.07% | -0.16% | 0.02% | -0.09% | -0.16% | |
| NZD | -0.08% | -0.01% | 0.01% | -0.08% | 0.10% | 0.09% | -0.07% | |
| CHF | -0.01% | 0.05% | 0.08% | -0.02% | 0.18% | 0.16% | 0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
