• The USD/JPY forecast indicates weaker investor confidence in the US economy.
• The Trump administration hinted at plans to fire Fed Chair Jerome Powell.
• Data last week revealed stronger-than-expected sales in the US.

The USD/JPY forecast indicates weaker investor confidence in the US economy following Trump’s comments, threatening the Fed’s independence. As a result, market participants are dumping the dollar and buying the safer yen. 

On Friday, the Trump administration hinted at plans to fire Fed Chair Jerome Powell, causing panic among traders. Since he came into office, the US president has wanted the Fed to continue its easing cycle. However, Powell has maintained a cautious tone, saying there was no hurry to lower borrowing costs. The Fed Chair believes the central bank needs more time to assess the impact of Trump’s tariffs. 

Trump’s comments raised fears that he would undermine the independence of the US central bank. Such an outcome would further lower investor confidence in the US economy. Already, Trump’s wild tariffs have dimmed the economy’s outlook. If his administration takes control of monetary policy, the outlook could worsen.

Meanwhile, data last week revealed stronger-than-expected sales in the US. The upbeat report pointed to robust consumer spending. However, analysts believe future reports will better capture the impact of Trump’s tariffs. This week, traders will focus on PMI data for further clues on the state of the economy. 

Elsewhere, speculators bet on a stronger yen due to expectations for more rate hikes by the BoJ.
 

USD/JPY key events today

Market participants do not expect any key economic releases from Japan or the US today. Therefore, the pair might extend last week’s moves.
 

USD/JPY technical forecast: Bears head for the 140.01 support

(Click on image to enlarge)

USD/JPY 4-hour chart

On the technical side, the USD/JPY price has broken below the 142.02 key support level, resulting in a lower low. At the same time, the price has swung well below the 30-SMA, showing bears have a solid lead. Meanwhile, the RSI trades in the oversold region, indicating solid bearish momentum. 

Bears have maintained control since they broke below the SMA. The price has traded in a bearish channel with clear support and resistance lines. Currently, USD/JPY is approaching the channel support. At the same time, it is nearing the 140.01 key level. A break below will strengthen the bearish bias. However, the price might pause or pull back before continuing lower.

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