USD/JPY is hovering just below its monthly high near 145.45 after the Federal Reserve’s hawkish pause boosted the US Dollar, while diminished expectations for a Bank of Japan rate hike keep the Japanese Yen on the defensive. Geopolitical tensions and trade-policy uncertainty, however, are limiting bullish follow-through for now.
🏦 Diverging Central-Bank Outlook Fuels Dollar Strength
| Driver | Latest Developments | Impact |
|---|---|---|
| Federal Reserve | • Held rates at 4.25 %–4.50 % • Dots still imply two cuts by end-2025, but only one in 2026-27 • Seven of 19 officials now favor no cuts in 2025 | ➜ Lifts USD via higher long-run rate expectations |
| Bank of Japan | • Next hike now expected Q1 2026 at earliest • BoJ reluctant to unwind stimulus amid weak domestic demand | ➜ Weighs on JPY |
| Trade Policy | • 25 % US tariffs on Japanese autos still unresolved • July 9 deadline for higher reciprocal tariffs looms | ➜ Adds downward pressure on JPY |
🌍 Geopolitics Provide Yen Support, Temper Dollar Rally
- Israel-Iran conflict enters day 7; US reportedly weighing strikes if Tehran refuses to curb its nuclear program.
- Trump’s team met in the Situation Room to review military options.
- Iran’s Supreme Leader warns any US involvement would cause “irreparable damage.”
Safe-haven flows into the Yen could intensify if hostilities escalate, offsetting some USD strength.
📊 USD/JPY Technical Snapshot
| Level | Role | Note |
|---|---|---|
| 146.25-146.30 | Resistance | May 29 swing high |
| 146.00 | Resistance | Psychological barrier |
| 145.45 | Resistance | Range top / monthly peak |
| 144.50-144.45 | Support | Minor pullback zone |
| 144.00 | Support | Round-number pivot |
| 143.55-143.50 | Support | Mid-May congestion |
| 142.80-142.75 | Support | Last Friday’s low |
Bias: Neutral-to-bullish while above 144.50.
Breakout trigger: Daily close > 145.45 opens 146.00, then 146.30.
Bearish trigger: Close < 144.45 exposes 144.00, then 143.55.
Oscillators on the daily chart are turning higher, hinting that bulls have the momentum edge—but a catalyst (for example, a clear de-escalation in the Middle East or fresh US data) is needed to punch through resistance.
🔮 Trading Themes to Watch
- Fed-vs-BoJ Rate Differential: Any shift in Fed rate-cut odds or new hints from Tokyo will move the pair.
- Tariff Countdown: July 9 auto-tariff deadline could spark volatility in JPY-crosses.
- Geopolitical Headlines: A sudden flare-up in the Israel-Iran theater could send USD/JPY sharply lower as safe-haven buying kicks in.
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