USD/JPY Extends Decline as Tariff Concerns Weigh on Markets
The USD/JPY pair continues its downward slide, struggling against mounting concerns over U.S. tariff policies, rate differentials, and global economic uncertainties. The U.S. Dollar (USD) is losing steam, while the Japanese Yen (JPY) faces pressure from widening interest rate gaps and fears of trade restrictions.
Market participants are now focused on the upcoming U.S. retail sales data, which could influence the Federal Reserve’s monetary policy outlook and determine the next major move for the currency pair.
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Technical Analysis – USD/JPY Downtrend Gathers Strength
Bearish Indicators Confirm Weakness
The USD/JPY pair has been in a sustained downtrend since peaking at 158.866 on January 10, shedding more than 5% in value as technical and fundamental factors align against the dollar.
💡 Key Technical Signals:
✅ Death Cross Formation – The 20-period and 50-period EMAs have crossed downward, reinforcing bearish momentum.
✅ Momentum Oscillator Below Neutral – A reading below 100 confirms sustained selling pressure.
✅ RSI Below 50 – The Relative Strength Index (RSI) remains in bearish territory, indicating continued weakness.
Key Resistance Levels for USD/JPY
📈 If bullish momentum returns, these resistance levels could act as barriers:
- 154.794 – February 12 daily high.
- 156.743 – January 23 peak.
- 158.866 – January 10 major resistance.
- 159.456 – Weekly R3 resistance zone.
Key Support Levels for USD/JPY
📉 If sellers maintain control, these support levels may be tested:
- 150.922 – February 7 swing low.
- 148.637 – December 3 low.
- 147.775 – Weekly S2 support level.
- 144.657 – Fibonacci 261.8% extension support.
📊 Now, let’s analyze USD/JPY’s price trend with a daily chart. 📈
Fundamental Analysis – Key Drivers for USD/JPY
1️⃣ U.S. Dollar Faces Downside Risks
The U.S. dollar is losing momentum, with traders reconsidering President Trump’s tariff threats. The Dollar Index (DXY) has dropped to a two-month low, weakening against most G-10 currencies, especially commodity-linked ones like the Australian Dollar (AUD) and Canadian Dollar (CAD).
- Market sentiment is shifting as tariff implementation delays boost global equities and emerging-market assets.
- Forex traders are scaling back bullish USD bets, with options signaling continued downward pressure.
- Despite economic resilience, prolonged uncertainty in trade policy could push the USD into a broader downtrend.
2️⃣ Japanese Yen Remains Volatile Amid Economic Uncertainty
- The yen extended its decline, hitting its weakest level in a week as rate differentials widen.
- Japan has requested an exemption from U.S. steel and aluminum tariffs, but trade policy uncertainty continues to weigh on JPY sentiment.
- The yen remains the strongest-performing G-10 currency against the dollar this year, with markets still anticipating a Bank of Japan rate hike.
- However, further JPY weakness may prompt intervention from Japanese authorities if volatility escalates.
Conclusion – What’s Next for USD/JPY?
- The USD/JPY remains in a bearish phase, with technical indicators confirming downward momentum.
- Trade policy uncertainty, interest rate differentials, and upcoming U.S. economic data will be key drivers of near-term price action.
- Key support and resistance levels will dictate price movements, with U.S. retail sales data likely adding volatility.
- Potential Japanese intervention and shifts in Fed rate expectations remain critical factors to watch.
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