The Japanese yen (JPY) continued to weaken early in the European trading session. This movement was influenced by U.S. President Donald Trump’s decision to delay additional tariffs on the European Union (EU). The delay reduced demand for safe-haven assets like the yen. As a result, the USD/JPY exchange rate edged higher, breaking above the 142.20–142.25 range. The pair was on track to reach a new monthly low recorded earlier this week.
Despite this upward push, traders bearish on the yen should exercise caution. There is growing optimism about a possible trade deal between Japan and the United States. Additionally, markets are increasingly expecting the Bank of Japan to continue raising interest rates, which could support the yen.
Contrasting Central Bank Expectations Weigh on USD/JPY
The Bank of Japan’s hawkish stance contrasts with market expectations that the U.S. Federal Reserve will cut borrowing costs further in 2025. At the same time, concerns over the worsening fiscal outlook in the U.S. have pushed the U.S. dollar to its lowest level in over a month early this week.
These factors may limit how far the yen can fall, as the dollar’s weakness could prevent further steep declines in USD/JPY. Traders are advised to wait for strong follow-through buying before confirming a near-term bottom for the pair or positioning for a sustained rise.
Technical Outlook: Bears Maintain Control
Technically, USD/JPY’s break below the key 143.00 level validates last week’s move below the 61.8% Fibonacci retracement of the April-May rally. Daily chart oscillators show increasing bearish momentum, suggesting downward pressure remains.
A continued drop below 142.00 would strengthen the bearish outlook. This could push the pair below medium-term support at 141.55 and toward the 141.00 round number. Further declines may test the year’s low near 140.00, a psychologically important level last hit on April 22.
Resistance Levels to Watch
On the upside, the recent high near 143.10 forms an immediate resistance point. Should the pair break above this level, short covering could push USD/JPY toward 143.65 and possibly 144.00.
The 144.00 level is a strong resistance barrier. A break above it might open the door for a further rally. However, traders may still view moves near 144.80 as selling opportunities. The pair could face additional resistance around the 145.00 psychological mark.
In summary, the Japanese yen’s recent weakness reflects shifts in trade policies and divergent central bank paths. While the technical trend favors further USD/JPY declines, traders should watch key support and resistance levels carefully amid mixed economic signals.
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