The Japanese yen bounced back from a one-week low reached earlier Wednesday against the U.S. dollar. However, the gains were limited and lacked strong follow-through. Investors appear confident that the Bank of Japan (BoJ) will continue raising interest rates as Japan faces rising inflation. Additionally, uncertainty over U.S. President Donald Trump’s tariff policies and ongoing geopolitical tensions have helped contain the yen’s losses by supporting its safe-haven appeal.
Risk Appetite Restrains Strong Yen Gains
Despite these factors, a generally optimistic risk sentiment in global markets has prevented traders from making aggressive bets on a stronger yen. Meanwhile, the U.S. dollar found support from largely positive U.S. economic data released on Tuesday. This upbeat macroeconomic backdrop helped boost the USD/JPY exchange rate.
At the same time, expectations differ between the two central banks: markets anticipate further Federal Reserve rate cuts in 2025, while the BoJ is expected to maintain a hawkish stance. This divergence has limited large moves in the dollar and favored yen buyers.
USD/JPY Technical Analysis: Resistance Limits Upside
USD/JPY briefly broke above the 143.65–143.75 zone overnight. This area corresponds to the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level of the recent downward move from the monthly high. This breakout could encourage bullish traders and support further intraday gains. Positive momentum indicators also back this outlook.
However, the pair has yet to clear the more significant 38.2% Fibonacci retracement level, and daily chart signals do not fully confirm a strong upward trend. As a result, caution is warranted. Any additional gains are likely to face stiff resistance near the psychological 145.00 level. Beyond that, the 50% Fibonacci retracement near 145.40 represents a key barrier; surpassing it could open the door for more upside.
Support Levels and Downside Risks
On the downside, the 144.00 mark offers initial support, followed by the 143.65–143.75 resistance zone, which may now act as a floor. If USD/JPY falls below 144.00, it would signal a weakening of the corrective rebound and could push the price toward the 143.00 round number.
Further declines might test the overnight swing low near 142.10 or even the monthly low. Traders will watch these levels closely to assess the pair’s next direction.
In summary, the yen’s modest rebound reflects mixed forces. While inflation and BoJ hawkishness support the currency, strong U.S. data and risk-on market mood have limited yen gains. Technical charts highlight key resistance points that may cap upside in USD/JPY near term.
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