The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen. The currency pairs respond more to global trade developments than domestic trends. AUD/USD remains vulnerable despite positive local data, while USD/JPY may rise if US inflation strengthens and the Fed maintains its cautious stance. AUD/USD looks to build on the previous day’s strong move up to a fresh weekly top amid a positive risk tone, which underpins the Aussie. Furthermore, Tuesday’s softer US CPI report keeps the USD bulls on the defensive and validates the positive outlook for the pair amid the US-China trade beaxy exchange review deal optimism, ahead of the Australian Wage Price Index.
The EUR/USD is usually quiet during the Asian session, as economic data influencing the pair is usually released during the European or US sessions. Activity increases as European traders begin their day, leading to heightened trading volume. This activity slows around midday during the European lunch break but picks up again when US markets come online. On the Japanese side, the Bank of Japan (BoJ) continues easymarkets broker to adopt a cautiously hawkish stance despite growing concerns over trade-related headwinds. Uchida noted that while US tariffs could hurt near-term economic growth, the BoJ would continue to raise interest rates if the current economic and inflation outlook unfolds as projected.
Markets Cautious Despite US-China Trade Progress, US Inflation and Consumer Data…
The 4-hour chart for USD/JPY shows that the pair has broken above the descending broadening wedge pattern at $146.40 and initiated a move toward $151. This breakout is a positive development and signals further upside potential. The pair failed to break below the pivotal $140 level, reinforcing the current upward bias. This was then echoed by BoJGovernor Ueda which placed a great deal on trade developments. In summary, thecentral bank is likely to go faster on rate hikes in case we get a good tradedeal and delay rate adjustments in case the trade deal disappoints. Recall, that he said 10% orlower tariffs would make him less inclined to cut rates faster.
Trading Tips:
- West Texas Intermediate, the US crude oil benchmark, is trading around $63.25 during the Asian trading hours on Wednesday.
- The analysis maintains a bearish function, with the impulsive mode reflecting strong downward momentum.
- AUD/USD remains vulnerable despite positive local data, while USD/JPY may rise if US inflation strengthens and the Fed maintains its cautious stance.
- Both the Bollinger Bands and the Z-Score confirm the extreme bearish positioning highlighted in the previous chart.
- In the short term, bears will target selling moves towards the support level of 145.60, then to the support of 145.00, respectively.
The data has bolstered market confidence that the Federal Reserve could begin cutting interest rates later this year. According to the CME FedWatch Tool, traders are now pricing in a 25 basis point rate cut in September with increased conviction. Today, we also have theFOMC policy decision where the Fed is expected to keep interest rates unchangedand could push back against the dovish market pricing giving the greenback a boostin the short term. The USDJPY Elliott Wave Analysis for the 4-hour chart shows a bearish trend for the U.S.
Without clear signals of tightening from the BoJ, JPY gains may be capped. The April US CPI report revealed a moderation in inflationary pressures. Headline CPI rose by just 0.2% (MoM), missing the 0.3% forecast and rebounding from March’s -0.1% decline. For a look at all of today’s economic events, check out our economic calendar. Both the Bollinger Bands and the Z-Score confirm the extreme bearish positioning highlighted in the previous chart.
Price Alerts
This increase reversed the previous 6.0% drop in April and marked the third rise in 2025. However, AUD/USD still dropped on Monday due to the strength of the US Dollar following the trade deal between China bitmex review and the United States. The advice we provide through our TradingLounge™ websites and our TradingLounge™ Membership has been prepared without considering your objectives, financial situation or needs.
However, bets that the Fed will cut rates further in 2025, bolstered by Tuesday’s softer US CPI print, could support the non-yielding yellow metal amid subdued USD price action. The analysis highlights the prevailing control of sellers, with the impulsive trend nature suggesting persistent downward pressure. Traders should seek confirmation of the bearish trend continuation, while being alert to any breach above the invalidation level that could revise the market view. The daily chart offers a larger context, indicating that the bearish trend remains intact unless critical resistance levels are surpassed. The USD continues to besupported amid the ongoing de-escalation in trade wars. This has most likely todo more with positioning rather than fundamentals.
The year will be politically marked by Trump’s return to the White House. On the other hand, if we turn around and take out the 0.65 level to the upside on a daily close, then I think the Aussie has a chance of going all the way to 0.67 followed by 0.69. Remember though, the Australian dollar is highly levered to China, so we’ll have to see how that plays out.
However, the upbeat mood was tempered by the US Consumer Price Index (CPI) report, which showed inflation slowing more than anticipated and weighed on the US Dollar. China’s narrower trade surplus with the US, from $27.6 billion in March to $20.46 billion in April, signals some success in rebalancing global trade. For Japan, this lowers regional tensions and may improve capital flows. As a result, USD/JPY could benefit from stronger Dollar flows and reduced regional uncertainty.
This is now triggeringa repricing in interest rates as the market scaled back the easing expectationsto 68 bps by year-end. Itgave also the greenback a boost as the market unwound the crowded dollarshorts. The USD got a boost acrossthe board yesterday on positive expectations about the first trade deal thateventually was revealed to be with the UK. Trump announcedthat tariffs on cars and steel will be lowered but the most important part wasthat the 10% “global tariff” will remain in place. Markets roared back to life as the US and China hit pause on their escalating trade war, with both sides emphasizing mutual respect and dignity.
About U.S. Dollar / Japanese Yen
He is a professor emeritus at the University of Tokyo and also worked as a professor at Kyoritsu Women’s University. In February 2023, former Prime Minister Fumio Kishida nominated Ueda as the governor of the BoJ. He is widely regarded as an expert on monetary policy but was considered a surprise appointment by analysts. He wasn’t even considered a dark-horse candidate, as the BoJ governor role has traditionally gone to long-serving Finance Ministry bureaucrats or central bank officials. Ueda is the first academic economist to lead the BoJ in the post-World War II era.
On the monetarypolicy front, the negative impact on the Japanese economy from tariffsuncertainty and the downward pressure on inflation from the surging yen willkeep the BoJ on the sidelines for the time being. The EUR/USD is one of the most widely traded currency pairs in the Forex market, where the Euro serves as the base currency and the US Dollar as the counter currency. It accounts for more than half of the total trading volume in the Forex market, making gaps almost inexistent, let alone sudden reversals caused by breakaway gaps. West Texas Intermediate, the US crude oil benchmark, is trading around $63.25 during the Asian trading hours on Wednesday.
USDJPY Outlook
- For a look at all of today’s economic events, check out our economic calendar.
- The extreme low level could indicate an oversold condition, potentially signaling a future reversal.
- The EUR/USD is usually quiet during the Asian session, as economic data influencing the pair is usually released during the European or US sessions.
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This is leading to ahawkish repricing in interest rates expectations with the market now seeing 56bps of easing for the Fed by year-end compared to like 120 bps at the peak ofthe fears in April. The short dollar trade was also pretty overcrowded so theunwinding in positioning is giving the greenback even more strength. The USD got a boost acrossthe board yesterday as the US-China tariff relief was much better thanexpected. The market is now looking at the more hawkish scenario where we getan average 10% global tariff rate and economic activity picks up on an easingin growth fears and general uncertainty.
About the USD/JPY (US Dollar/Japanese Yen)
The movement is categorized as impulsive, indicating strong downward momentum. The current structure is recognized as orange wave 3, a segment within the broader navy blue wave 3 sequence. This setup suggests an active and strengthening bearish phase, with orange wave 3 now progressing after the completion of orange wave 2.