USD/JPY hit a six-month low near 145.57 on Friday, after recording a 2% rise in the previous session.
Main factors moving the USD/JPY pair
The sweeping tariffs imposed by US President Donald Trump have increased demand for safe-haven assets. This week, Trump announced a basic 10% tariff on all imports, set to take effect on April 5. Some 60 countries are expected to face higher tariffs, including China (54%), the EU (20%), Japan (24%), India (27%) and Vietnam (46%).
The market reacted quickly and strongly. A new wave of tariff measures points to the possibility of inflation spiralling out of control and slowing global GDP growth. At the same time, demand for all safe-haven assets, including the yen, has increased.
We did not expect the US dollar to reach 146.50 within hours, as it fell sharply and closed down 2.13% (146.06), its biggest daily decline since December 2023. Although oversold, it is too early to expect this weakness to stabilize.
Statistics from Japan showed that personal spending fell less than expected in February, suggesting some resilience in the economy.
The 2025 baseline scenario suggests that the Bank of Japan will raise interest rates this year, although uncertainty surrounding global trade and domestic economic conditions overshadows the outlook.
The US dollar initially fell against the Japanese yen, then recovered and bounced slightly, but it is still too early to judge that. We’ll see what happens next. I think over time, we’ll see what we can do at the 148 yen level. If we break through the lower low of today’s trading range, we could reach 142 yen.
JPY puts pressure on USD, NM data is next
The Japanese yen continues to rise on Friday. In the European session, USD/JPY is trading at 144.81, down 0.86% on the day. The yen is trading at its strongest level since September 2024, rising 3.3% this week.
Investors are still reeling from heavy losses in financial markets, but will have to focus on today’s US nonfarm payrolls data. Market estimates point to 135,000 jobs, down from February’s 151,000 increases. The US labor market is gradually declining, and the Federal Reserve hopes that this trend will continue.
Fed policymakers have been looking to cut interest rates twice this year, but President Trump’s surprise announcement of tariffs will force the Fed to reconsider its growth and inflation forecasts.
What to expect from the Federal Reserve?
This is not a simple question, as tariffs have led to a sharp decline in stock markets, and deep uncertainty has prevailed. The tariffs will increase inflation, but they will also weaken growth, making it harder for the Federal Reserve to balance it. Financial markets expect the slowdown of the U.S. economy to determine interest rate policy rather than inflation, which could mean four cuts in 2025 if the economy enters recession.
Japanese household spending recovered in February recording a 3.5% month-on-month increase, following a 4.5% decline in January. This growth exceeded market expectations of 0.5%, and was the strongest pace of growth since March 2022. The Bank of Japan is closely monitoring consumption to determine when to raise interest rates, and it is unclear how the new U.S. tariffs will affect consumer confidence and spending.
USD trades in range of 145.20/147.50 against JPY
The US dollar (USD) is likely to trade in the range of 145.20/147.50 against the Japanese yen (JPY). In the long term, it is too early to expect weakness to stabilize, but the US dollar should break the 145.00 level and hold below it before retreating further, according to currency analysts at UOB Group, Quick Sir Liang and Peter Shea.
USD/JPY will continue to fall below 145.00
24-hour outlook: “After the sharp decline in the US dollar two days ago and yesterday morning, we noted that “although this significant decline has led to a sharp and rapid rise in bearish momentum, conditions are overselling.” However, we noted that “as long as the US dollar remains below the 149.40 level, it may continue to weaken.” We also noted that “due to oversold conditions, any decline is unlikely to reach the key support level at 146.50 today.” The sharp sell-off that followed, which hit a low of 145.18, was surprising. The decline is still oversold, and the US dollar is unlikely to fall any further. Today, the US dollar is likely to trade within the range of 145.20/147.50.
Forecast from one to three weeks: “Yesterday (April 3, spot rate at 148.00), we confirmed that ‘increased momentum points to further weakening of the US dollar’. We added that “the level to watch is 146.50.” We did not expect the US dollar to reach 146.50 within hours, as it fell sharply and closed down 2.13% (146.06), its biggest daily decline since December 2023. Although oversold, it is too early to expect this weakness to stabilize. On the other hand, the level of 145.00 represents an important support, and the US dollar should break it and hold below it before retreating further.
