- BoJ’s Naoki Tamura said on Thursday that the central bank should raise rates to 1%.
- The dollar remained fragile after a pause in some of Trump’s tariffs.
- Traders are looking forward to the US nonfarm payrolls report.
The USD/JPY outlook indicates a surge in expectations for another BoJ rate hike this year after hawkish policymaker remarks. Meanwhile, the dollar traded near an eight-week low against the yen after Trump’s tariffs failed to take off in Canada and Mexico, easing fears of global trade wars.
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Hawkish BoJ policymaker Naoki Tamura said on Thursday that the central bank should raise rates to 1% by the end of 2025. After these remarks, market participants were pricing a 98% chance of another rate hike by September. As a result, the yen rallied.
The BoJ maintained a cautious tone towards the end of 2024. However, since Trump’s inauguration, policymakers have gained motivation to keep rates high. The new administration’s policy changes might strengthen the dollar, putting pressure on the yen. Moreover, recent data from Japan has revealed stronger wage growth and high inflation, giving the BoJ enough room to hike rates.
On the other hand, the dollar remained fragile after a pause in some of Trump’s tariffs on Tuesday. Initially, the US currency gained from the prospect of tariffs on Canada, Mexico, and China. However, Canada and Mexico managed to negotiate with the US, leading to a pause. Since then, market participants have viewed these tariffs as negotiating tactics, pushing the dollar lower. Meanwhile, traders are looking forward to the US nonfarm payrolls report for more clues on future Fed moves.
USD/JPY key events today
USD/JPY technical outlook: 152.00 support halts sharp decline
On the technical side, the USD/JPY price has paused its decline near the 152.00 support level. The bearish bias is strong because the price trades well below the 30-SMA, and the RSI is nearer the oversold region.
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Previously, the downtrend was showing weaker momentum between the 154.01 support and the 156.51 resistance levels. As a result, the price kept puncturing the 30-SMA resistance. However, a surge in bearish momentum allowed USD/JPY to break below the 154.01 support level, leading to a strong swing below the 30-SMA.
The pause at the 152.00 level will allow bulls to return and retest the 154.01 as resistance or the 30-SMA. Nevertheless, given the strong bearish bias, the downtrend will likely continue with a new low below 152.00.
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