The USD/JPY pair retraces its recent gains, trading around 147.30 during the Asian session on Tuesday. This decline comes after fresh political tensions in the United States, with President Donald Trump threatening to remove Federal Reserve (Fed) Governor Lisa Cook, adding uncertainty to the US Dollar’s strength.
Key Developments Impacting USD/JPY
The US Dollar struggles as market sentiment turns cautious following Trump’s comments about removing Fed Governor Lisa Cook from her position. This move would allow Trump to influence Fed policy further, raising concerns over the independence of the central bank. Cook’s removal is seen by market experts as a direct attack on the Fed’s autonomy, increasing uncertainty over the future path of US interest rates.
In addition to the Fed-related tensions, President Trump has also ramped up his rhetoric on trade. He threatened to impose “subsequent additional tariffs” on Chinese goods and export restrictions on advanced technology and semiconductors, retaliating against digital services taxes targeting US tech companies. This rhetoric adds further pressure to the USD and contributes to the depreciation of the Greenback.
Japanese Yen Benefits from Political Stability
Meanwhile, the Japanese Yen gains traction as Japan’s domestic political scene stabilizes. Public support for Japanese Prime Minister Shigeru Ishiba has risen following the government’s successful trade deal with the United States and the announcement of increased rice production, strengthening the domestic outlook. A recent Yomiuri newspaper poll showed a 20% rise in support for Ishiba, despite his ruling coalition’s loss in the July elections, boosting the sentiment around the JPY.
The market focus is likely to remain on the evolving geopolitical and economic developments, with Trump’s latest threats and Japan’s political stability playing significant roles in shaping USD/JPY price action.
USD/JPY Outlook: Technical Levels to Watch
On the downside, the immediate support for USD/JPY stands near 147.00, followed by key levels at 146.50 and 146.00. If the pair breaks below these levels, it could open the door to further downside movement.
On the upside, resistance remains around the 147.80 region, with a break above this level potentially leading to a retest of 148.00 and further bullish momentum.
In conclusion, USD/JPY is likely to remain volatile as geopolitical tensions and Fed-related uncertainty influence market sentiment. Traders should keep an eye on President Trump’s actions and comments, as well as any developments in Japanese domestic politics, as these factors will likely dictate the near-term direction for the pair.
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