The USD/JPY outlook shows a brighter day for the US dollar after Trump announced more tariffs. Meanwhile, a drop in the US unemployment rate indicated a still-resilient US labor sector. Nevertheless, the pair traded near lows hit last week as market participants increased bets for a Bank of Japan rate hike. 

Trump announced a new 25% tariff on aluminum and steel imports, plus a reciprocal tariff on all countries starting this week. This news increased fears of trade wars that dampened risk appetite. Meanwhile, demand for the safe-haven dollar increased. The greenback also recovered at the prospect of increased demand for local US goods due to tariffs. 

Meanwhile, data on Friday showed slower job growth, with the US economy adding 143,000 jobs compared to estimates of 169,000. Nevertheless, the unemployment rate unexpectedly eased from 4.1% to 4.0%, indicating stronger demand for labor. A resilient labor market will likely keep the Fed on a cautious path.

On the other hand, the yen eased slightly on Monday after soaring in the previous week due to increased expectations for a BoJ rate hike. Data from Japan revealed stronger wage growth, creating the right conditions for higher interest rates.

USD/JPY key events today

Market participants do not expect high-impact reports from the US or Japan. Therefore, the price will likely consolidate.

USD/JPY technical outlook: Bullish engulfing candle

(Click on image to enlarge)

USD/JPY 4-hour chart

On the technical side, the USD/JPY price has rebounded after meeting the 151.02 support level. However, the bias remains bearish since the price trades below the 30-SMA with the RSI in bearish territory below 50. The decline started when the price broke below the 30-asma and the 154.01 support level. 

After such a sharp move, bears showed exhaustion near the 151.02 support level. As a result, bulls resurfaced and made a bullish engulfing candlestick. The pattern shows a surge in bullish momentum that might allow USD/JPY to bounce higher and retest the 30-SMA. If the price climbs higher, it will retest the 154.01 resistance before continuing its decline. 

The downtrend will continue if the price breaks below the 151.02 support to make new lows. Otherwise, bulls might reverse the trend.

More By This Author: