Currency Updates

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 Β₯115.8 billion in April, reversing a Β₯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 β€” 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

πŸ” 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% β€” 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.


πŸ“‰ USD/JPY Technical Forecast

  • Support zone: 144.00 β†’ 142.35 (May 6 low)
  • Resistance zone: 145.00 β†’ 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

πŸ‡¦πŸ‡Ί 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 β€” a key input for future RBA rate decisions.


πŸ“Š AUD/USD Technical Forecast and Key Scenarios

  • Support levels: $0.6400 β†’ $0.63623 (50 & 200-day EMA)
  • Resistance levels: $0.6450 β†’ $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

πŸ“… Events to Watch Today

PairKey Drivers
USD/JPYJapan trade terms, BoJ tone, Fed speeches
AUD/USDAussie wage data, China policy, Fed rate guidance
USD IndexFed’s Barkin speech, global trade headlines

Stay Updated with Daily Forex Pakistan.

Yasher Rizwan

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