Japanese Yen Strengthens Against US Dollar Amid Escalating US-China Trade Tensions

The Japanese Yen (JPY) started the week on a strong note, maintaining its momentum against the US Dollar (USD) as investors flock to safe-haven assets amid heightened concerns over the US-China trade war. With the USD/JPY pair trading near multi-month lows, market sentiment is clearly favoring the Yen as geopolitical and economic uncertainties rise.

📉 US-China Trade War Fuels Demand for Safe-Haven Yen

Rising tensions between the United States and China took center stage last week, as President Trump imposed a historic 145% tariff on Chinese goods, prompting an immediate retaliation from Beijing with 125% tariffs on American imports. This sharp escalation has triggered fears of a global economic slowdown and spurred demand for safe-haven currencies—primarily the Japanese Yen.

Adding to the Yen’s strength, investors are hopeful that Japan and the US could reach a more amicable trade agreement, potentially shielding Japan from the full impact of these global trade frictions. Statements from US Treasury Secretary Scott Bessent and Japanese officials signal that trade talks between the two nations are progressing in a constructive direction.

🏦 Diverging Monetary Policies: BoJ vs. Fed

While the Bank of Japan (BoJ) is expected to raise interest rates in 2025 to combat growing inflation pressures, the Federal Reserve (Fed) is leaning in the opposite direction. With US CPI falling to 2.4% in March, markets are increasingly pricing in up to 90 basis points of rate cuts by the end of the year.

This divergence in interest rate outlooks between the BoJ and Fed is further weakening the US Dollar and enhancing the appeal of the Japanese Yen.

🔍 Economic Data Supports Stronger JPY Outlook

Japan’s inflation data further boosted Yen sentiment, with March wholesale prices rising 4.2% year-over-year, reflecting sustained cost pressures. This aligns with rising wages and domestic consumption—factors that may justify additional BoJ rate hikes.

In contrast, US inflation data continues to soften, and consumer confidence in the US economy is waning. Combined with political uncertainty and potential Fed leadership changes, these elements are undermining the Dollar’s stability.

📊 USD/JPY Technical Outlook: Will 142.00 Hold?

• Support levels: The 142.00 mark remains a critical short-term support. A decisive break below this level could see USD/JPY decline toward 141.60, then 141.00, and possibly retest the 140.30–140.00 zone—a level last seen in September 2024.
• Resistance levels: On the upside, any rebound may face resistance around 143.50, followed by 144.00 and 145.00. A breakout above these could trigger a short-covering rally towards 146.00.

With the Relative Strength Index (RSI) nearing oversold territory, a brief consolidation or bounce may occur before further downside pressure resumes.

📌 Key Takeaways

• JPY continues to rise as safe-haven demand grows amid global trade turmoil.
• Diverging BoJ-Fed monetary policies favor continued Yen strength.
• Technical indicators suggest more downside ahead for USD/JPY, but short-term bounces are possible.
• Investors will watch upcoming trade negotiations and central bank speeches for direction.

Stay updated with the latest JPY news, USD/JPY forecasts, and global forex analysis at www.dailyforex.pk — your trusted source for real-time currency insights.