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:
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.
Bearish Scenario:
Bullish Scenario:
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.
Bearish Scenario:
Bullish Scenario:
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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