US Trade Policy and Fed Outlook Set the Tone
Market participants remain focused on the evolving stance of the Federal Reserve. While Fed officials have hinted at a forthcoming pivot to a more dovish path, persistently elevated inflation and robust labor market data give policymakers the flexibility to keep rates steady. According to CME’s FedWatch Tool, the odds of a 25-basis-point cut at the September meeting stand at 54.3%.
Meanwhile, Trump confirmed he had met with Republican Party leaders this week, securing support for his call to replace Fed Chair Jerome Powell with advisor Kevin Hassett. However, it’s important to note that the White House still lacks the legal authority for such a move. Amid this uncertainty, USD/JPY partially erased its midweek losses and closed Wednesday at 147.82.
In summary, while Trump’s tariff announcements are propping up the dollar in the medium term, lingering questions about Fed leadership and hints of a quicker monetary easing cycle continue to exert downside pressure.
Technical Picture: Key Levels in Focus
The long-term trend for USD/JPY remains broadly bearish, with the pair now testing the crucial resistance level at 148.65. A successful defense here would favor short positions targeting 146.33 and 142.50. Conversely, a break higher could open the path toward the March high at 151.18 and potentially signal a broader trend reversal.
On the medium-term chart, the uptrend continues this week after the price reached and surpassed the key support zone at 142.22–141.62, printing new highs for the year. The pair is now targeting zone 2 (153.69–152.89), while the main support shifts toward 142.71–142.10—an area to watch for fresh long opportunities if tested, with upside targets at 145.65 and 149.18.
USD/JPY at multi-month highsKey Resistance Levels
- 148.65 (May high)
- 151.18 (March high)
- 154.80
Key Support Levels
- 146.33
- 142.50
- 140.25
Trade Setups for the Week
- Sell Limit: Short positions from 148.65 targeting 146.33, with a stop-loss at 149.35. Timeframe: 9–12 days.
- Buy Stop: Long positions above 149.35 targeting 151.18, with a stop-loss at 148.45.
Key levels: 140.25, 142.50, 146.33, 148.65, 151.18, 154.80
Conclusion: Tariff Tailwinds vs. Policy Uncertainty
The USD/JPY rally is being powered by protectionist trade policies and firm US data, but uncertainty around Fed leadership and the timing of monetary easing keep volatility elevated. The coming sessions will be shaped by further comments from Fed officials and fresh developments on the US trade front.