The Japanese Yen came under pressure after Japan reported a surprise trade deficit of ¥115.8 billion in April, reversing a ¥559.4 billion surplus in March. This sharp deterioration in trade performance has heightened concerns over a potential recession, especially following a Q1 economic contraction.
While exports rose 2% YoY, a decline in imports by 2.2% highlights weakening domestic demand. Japan’s heavy reliance on trade, with exports accounting for nearly 45% of GDP, means deteriorating trade terms could further dampen GDP growth — potentially deterring the Bank of Japan (BoJ) from tightening policy in the near term.
Key Takeaways:
- Widening trade deficit reduces rate hike bets
- Risk of recession may suppress demand for the Yen
- Export slump to the U.S. adds to downside risks
🔁 USD/JPY Outlook: Trade Terms and Fed Signals in Focus
The USD/JPY pair is currently reacting to mixed global cues, trading cautiously as investors await commentary from Federal Reserve officials and further clarity on U.S.-Japan trade talks. Tokyo is reportedly urging the Trump administration to reconsider recent tariff actions, as exports to the U.S. dropped 1.8%, while imports fell 11.6% — widening Japan’s trade surplus with its largest trading partner.
Today’s Key Catalyst:
Fed’s Tom Barkin is scheduled to speak later today. Any commentary on inflation, interest rates, or recession risks could shift USD sentiment and directly influence USD/JPY price action.
📉 USD/JPY Technical Forecast
- Support zone: 144.00 → 142.35 (May 6 low)
- Resistance zone: 145.00 → 145.80 (50-day EMA)
Bearish Scenario:
- Dovish Fed tone
- Stronger Japanese data
- Rising global trade risks
Could drive USD/JPY lower toward 142.35
Bullish Scenario:
- Hawkish Fed comments
- Weak Japanese outlook
- Easing U.S.-Japan trade tensions
Could lift the pair above 145.00, targeting the 50-day EMA
🇦🇺 AUD/USD in Spotlight as Wage Growth Data Hits
The Australian Dollar (AUD/USD) is treading cautiously ahead of today’s wage growth data release from the Australian Bureau of Statistics (ABS). This comes right after the Reserve Bank of Australia (RBA) announced a rate cut and warned of softer labor market conditions.
In December, wages rose 5.7% YoY but declined 0.7% MoM, indicating fragility in income trends. The March report is expected to offer more clarity on wage inflation — a key input for future RBA rate decisions.
📊 AUD/USD Technical Forecast and Key Scenarios
- Support levels: $0.6400 → $0.63623 (50 & 200-day EMA)
- Resistance levels: $0.6450 → $0.6500 (May 14 high)
Bearish Scenario:
- Weak wage growth
- Dovish RBA outlook
- Rising U.S.-China trade tensions
Could drag AUD/USD toward $0.6362 and below the 200-day EMA
Bullish Scenario:
- Strong wage gains
- Hawkish RBA commentary
- Easing China trade concerns or Beijing stimulus
Could lift the pair to $0.6500 and beyond
📅 Events to Watch Today
| Pair | Key Drivers |
|---|---|
| USD/JPY | Japan trade terms, BoJ tone, Fed speeches |
| AUD/USD | Aussie wage data, China policy, Fed rate guidance |
| USD Index | Fed’s Barkin speech, global trade headlines |
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