The Japanese Yen (JPY) continues to show weakness against the US Dollar (USD), even though there has been no strong selling triggered by hawkish signals from the Bank of Japan (BoJ). Investors seem confident that the BoJ will maintain its course of monetary policy normalization, especially as inflation in Japan is broadening. This confidence was reinforced by BoJ Governor Kazuo Ueda’s recent speech to parliament, where he reaffirmed the bank’s steady policy approach.
This outlook contrasts with the Federal Reserve’s (Fed) expected move to cut interest rates in 2025, which supports the yen as a low-yield currency. Despite this, the yen has not gained significant strength.
Geopolitical and Economic Factors Affecting the Yen
The ongoing Russia-Ukraine conflict and rising trade tensions have added to geopolitical risks. These factors usually boost demand for safe-haven currencies like the yen. However, calls for the BoJ to slow or maintain its bond purchases after fiscal 2026 highlight the difficulty the central bank faces in unwinding its large monetary stimulus. This uncertainty discourages yen buyers from placing new bets.
Additionally, the US dollar’s slight rebound from multi-week lows continues to encourage buying of USD/JPY in early European trading on Tuesday.
USD/JPY Faces Key Technical Levels
From a technical viewpoint, USD/JPY recently slipped below a key support zone around 143.65-143.60. This area aligns with the 200-hour simple moving average (SMA) and is seen as a critical bearish signal. This level may prevent further intraday gains for the pair.
If USD/JPY manages to hold above this zone and break higher, it could trigger short-covering and push prices toward 144.00. The upward momentum could extend further but may slow near the resistance zone of 144.40-144.45.
Conversely, a break below 143.00 could lead USD/JPY to test support near the Asian session lows around 142.40-142.35. Below that, the 142.10 level, last week’s swing low, could be next. If that support fails, the pair could continue its decline from the May monthly high, possibly falling toward 141.60 and even below 141.00.
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