Yen Slides on Trade Deficit Shock, Aussie Dollar Eyes Wage Data and Fed Tone for Direction

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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Yasher Rizwan