On Monday, the Japanese Yen extended its losing streak against the US Dollar for the third consecutive day. The currency’s weakness persisted throughout the Asian trading session, a situation exacerbated by Japan’s lackluster Purchasing Managers’ Index (PMI) figures released earlier in the day.
PMI Data Weighs Heavily on the Yen
According to preliminary estimates on Monday, the Au Jibun Bank Japan Manufacturing PMI dropped from 49.0 in February to 48.3 in March 2025. This marked its lowest reading since March 2024 and signaled a ninth consecutive month of contraction in the manufacturing sector. Adding to the gloom, the service sector, which had been a bright spot in Japan’s economic landscape, lost its growth momentum and contracted for the first time in five months. The overall business outlook also slumped to its lowest level since August 2020, casting a shadow over the Japanese Yen.
Trump Tariff Reports Provide an Additional Headwind
Over the weekend, reports emerged that US President Donald Trump’s planned reciprocal tariffs, set to take effect on April 2, would be more narrowly focused and less stringent than initially feared. This news buoyed investors’ confidence, as it raised hopes of reduced economic disruption. Consequently, the safe-haven appeal of the Japanese Yen waned further, adding to its downward pressure.
Diverging Central Bank Policies Create Uncertainty
While the Japanese Yen faced downward pressure, the US Dollar maintained its recovery from a multi – month low, pushing the USD/JPY pair closer to the psychologically significant 150.00 mark. However, the currency pair’s upward movement may be capped due to diverging expectations regarding the policies of the Bank of Japan (BoJ) and the Federal Reserve (Fed).
In Japan, strong wage growth in this year’s spring labor negotiations and inflation remaining above the central bank’s 2% target have opened the door for potential further interest rate hikes by the BoJ. BoJ Governor Kazuo Ueda and Deputy Governor Shinichi Uchida have both signaled the central bank’s willingness to adjust its monetary policy. This has curbed the appetite of JPY bears to make aggressive bets against the currency.
On the other hand, the Fed, while raising its inflation projection, still forecasts two 25 – basis – point rate cuts by the end of 2025. Fears of a tariff – driven economic slowdown have led investors to price in the likelihood of an earlier resumption of the Fed’s rate – cutting cycle. This expectation may limit the US Dollar’s upside potential and offer some support to the lower – yielding Japanese Yen.
Technical Outlook for USD/JPY
From a technical perspective, for the USD/JPY pair, bulls need to drive the price above the 200 – period Simple Moving Average (SMA) on the 4 – hour chart, which is just above the 150.00 mark. If successful, this could potentially push the spot price to the 151.00 mark and even towards the monthly peak around the 151.30 region, given the positive momentum building in the daily chart oscillators.
Conversely, the Asian session low around 149.30 is currently acting as a short – term support level. Below this, the 148.60 – 148.55 support zone is crucial. A decisive break below this zone could expose the pair to a more significant downward move, potentially accelerating towards last week’s swing low around 148.28 – 148.15 and then towards the 148.00 mark and the 147.75 horizontal support. Further selling pressure could even lead the pair to slide towards the 147.30 region and eventually reach the 147.00 mark and the 146.55 – 146.50 area, which was the lowest level since early October touched earlier this month.
Upcoming Economic Releases to Watch
Traders are now eagerly awaiting the release of flash US PMIs, which, along with speeches by influential Federal Open Market Committee (FOMC) members, could provide fresh trading impetus. However, the spotlight will be firmly on the release of the Tokyo Consumer Price Index (CPI) and the US Personal Consumption Expenditure (PCE) Price Index on Friday, as these data points could significantly impact currency movements.
Related Topics:
Japanese Yen Weakens as CPI Data and Fed Outlook Impact USD/JPY
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