The Japanese Yen (JPY) remains firm against the U.S. Dollar (USD) heading into the European session, trading just below a one-month high reached earlier on Tuesday. U.S. President Donald Trump’s remarks on tariffs reignited concerns about a potential global trade war, providing support for the JPY. Additionally, growing expectations that the Bank of Japan (BoJ) will raise interest rates at its upcoming policy meeting have further bolstered the Yen’s position as a safe-haven asset.
In the U.S., Treasury bond yields continue to decline, extending a one-week downtrend as markets anticipate two interest rate cuts by the Federal Reserve this year. This narrowing of the U.S.-Japan rate differential has added pressure on the USD, contributing to the JPY’s strength. Although the USD has regained some ground after reaching a two-week low overnight, the USD/JPY pair is still trading below the 155.00 mark, showing resilience in holding support levels.
From a technical perspective, the USD/JPY pair is currently defending the lower boundary of a multi-month ascending channel, making it prudent for traders to wait for a confirmed breakdown below this support before positioning for further downside. If a breakdown occurs, the next immediate support levels are around 154.50-154.45, followed by the psychological 154.00 figure, and further down to the mid-153.00s and 153.00 mark.
On the flip side, the peak of the Asian session around 156.25 now serves as a near-term resistance. A sustained move above the overnight high of 156.58-156.60 could enable the USD/JPY pair to push toward the 157.00 level. If the pair manages to break through this level, the recovery could extend to the 157.25-157.30 region and the 157.60 zone, potentially reaching the 158.00 round figure. A strong move beyond this area could set the stage for a retest of the multi-month peak around 159.00 reached on January 10.
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