USD/JPY Struggles to Extend Gains Amid Fed Concerns and Political Uncertainty

The USD/JPY pair showed a slight recovery on Wednesday, rising to around 147.60, as the US Dollar regained some lost ground. However, concerns over Federal Reserve (Fed) independence following President Trump’s announcement of the removal of Fed Governor Lisa Cook from her position could cap the upside momentum for the pair.

Political Uncertainty Surrounding the Fed

President Trump’s decision to remove Fed Governor Lisa Cook from her post has stirred controversy, as it marks the first instance of a sitting president firing a member of the Federal Reserve’s Board of Governors. The implications of this move are significant, as it casts doubt on the independence of the Fed, a key element for market stability and credibility. With Trump’s influence over the central bank growing, there are concerns about future monetary policy direction, especially if he manages to secure a majority on the Fed’s board.

This political development has created a wave of uncertainty in the markets, making traders cautious. The looming question is whether the independence of the Federal Reserve will be compromised, and whether this will affect its ability to make decisions based on economic data rather than political pressure.

Japan’s Domestic Stability

On the other hand, the Japanese Yen (JPY) could see some relief amid increasing domestic political stability. According to a Yomiuri newspaper public opinion poll, support for Japanese Prime Minister Shigeru Ishiba has surged by 20%, despite his ruling coalition losing its majority in the recent parliamentary election. This shift in public approval could bolster confidence in Japan’s economic policy direction, supporting the Yen.

Furthermore, Japan’s chief trade negotiator, Akazawa, will head back to the United States later this week to discuss Japanese investment in the US, adding another layer of market focus to the USD/JPY pair.

Key Economic Data Ahead

Looking ahead, traders will focus on key economic releases from both Japan and the US. Japan’s Tokyo Consumer Price Index (CPI) and Retail Trade data, due for release on Friday, will provide more insight into Japan’s economic health and could potentially impact the Yen.

Meanwhile, the market will continue to digest the political and economic implications of the ongoing US Fed concerns and assess whether these developments will hinder the US Dollar’s performance.

Technical Overview

The immediate resistance for USD/JPY stands at the 147.80 level, with support seen around 147.00. The pair is currently testing the upside, but traders should remain cautious as the uncertainty surrounding the Fed’s future moves could keep market sentiment volatile.

As we await further updates from both sides of the Pacific, the USD/JPY pair remains stuck between political uncertainty and economic factors, with its short-term direction heavily influenced by Fed developments and Japan’s upcoming economic data.

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