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Key factors influencing USD/JPY movement

Recent developments in global trade also captured market attention. The US and China had earlier agreed to a temporary 90-day tariff reduction, though uncertainty lingers over future trade policy once the agreement expires.

In bilateral discussions, Japanese Prime Minister Shigeru Ishiba stated that Tokyo would reject any provisional trade deal with the US unless it included safeguards for the auto industry. He urged Washington to reconsider its proposed 25% tariff on Japanese car imports.

Domestic data showed Japan’s producer prices rose at an annualised rate of 4.0% in April, down from 4.2% in March – marking the slowest growth since December last year.

The Bank of Japan remains cautious in its monetary policy approach, citing persistent uncertainties in both economic activity and inflation trends.

Meanwhile, demand for the yen as a safe-haven asset remains muted as global markets focus heavily on progress in US trade negotiations with key partners.

Technical analysis: USD/JPY

H4 Chart:

(Click on image to enlarge)

• The pair completed its third upward wave, peaking at 148.62, before entering a corrective phase
• The correction target stands at 146.40, with expectations of a new upward wave toward 150.90 once the pullback concludes
• This outlook is supported by the MACD indicator, where the signal line has exited the histogram zone and points firmly downward

H1 Chart:

(Click on image to enlarge)

• The market has consolidated around 147.50, with a downward breakout extending the correction
• A further decline to 146.78 is anticipated, possibly followed by a retest of 147.50 (from below) before another drop toward 146.40
• A subsequent upward wave targeting 148.62 is expected
• The Stochastic oscillator confirms this scenario, with its signal line below 20 but rising sharply towards 50
   

Conclusion

The yen’s modest rebound reflects a combination of dollar weakness and cautious optimism in trade talks. However, with the BoJ maintaining a dovish stance and risk sentiment improving, further yen gains may be limited unless safe-haven demand resurges.

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