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Key Drivers Behind USD/JPY Movements

The yen’s rally is gaining momentum amid rising global trade risks. Additionally, investors are growing increasingly wary of US assets.

Last week’s tentative market optimism has now faded, with sentiment deteriorating following remarks from US President Donald Trump regarding the potential dismissal of Federal Reserve Chair Jerome Powell. Trump has expressed dissatisfaction with the Fed’s pace of decision-making, with the White House believing progress is too slow.

Domestically, Japanese investors are closely watching the upcoming Bank of Japan (BoJ) meeting on 1 May. While the key interest rate is expected to remain steady at 0.50% per annum, the central bank may revise its economic growth forecasts—prompted by mounting external risks, including the impact of US tariffs on Japanese exports.

The yen continues to perform strongly as a safe-haven asset. However, an excessively strong JPY also carries risks.

Technical Analysis: USD/JPY

H4 Chart

(Click on image to enlarge)

On the H4 chart, USD/JPY has broken below the 141.55 level, extending its downward wave towards 138.88. This is a near-term target, and upon reaching it, a corrective rebound towards 143.55 is possible. Beyond that, further downside towards 136.22 may be considered. This scenario is supported by the MACD indicator, with its signal line firmly below zero and pointing sharply downward.

H1 Chart

(Click on image to enlarge)

On the H1 chart, the pair continues to develop the third wave of its downtrend. The immediate target of 140.00 has been met, and a temporary rebound to 141.55 (testing from below) could occur today. Subsequently, another decline towards 138.88 may follow. This outlook is corroborated by the Stochastic oscillator, whose signal line is below 20 but turning upward towards 80.
 

Conclusion

While the yen’s strength reflects its defensive appeal, excessive appreciation could prove detrimental. Traders should monitor both fundamental developments and technical signals for further guidance.

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