USD/JPY Forecast: Yen Slips On Potential Tariff Impacts

  • The USD/JPY forecast shows a pullback in the yen.
  • Trump’s tariff on steel and aluminium imports came into effect on Wednesday.
  • Traders are looking forward to the US CPI report.

The USD/JPY forecast shows a pullback in the yen as the focus shifts to the impact of Trump’s tariffs on Japan’s export-reliant economy. At the same time, fears of the US recession kept the dollar under pressure. However, the greenback rebounded ahead of the US CPI report to gauge the outlook for Fed rate cuts.

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The yen pulled back from recent highs as Trump maintained his aggressive stance on tariffs. On Wednesday, his tariff on steel and aluminium imports came into effect, igniting a trade war with the Eurozone. This has also shone a light on the looming reciprocal tariff. 

Trump’s tariffs will significantly impact the global economy. This includes Japan’s export-reliant economy. As a result, demand for the yen eased on Wednesday. Investors are seeking safety in other assets like gold. 

Meanwhile, the Bank of Japan remains hawkish on policy. Companies in Japan agreed to more wage hikes on Wednesday, setting in place the right conditions for rate hikes. As a result, market participants expect more rate hikes this year. However, the next move might come in May. 

Meanwhile, traders are looking forward to the US CPI report. Economists expect inflation to increase by 0.3%, lower than the previous reading of 0.5%. Meanwhile, the annual figure might ease to 2.9%.

USD/JPY key events today

  • US Core CPI m/m
  • US CPI m/m
  • US CPI y/y

USD/JPY technical forecast: Bulls approach the 149.00 resistance

USD/JPY technical forecastUSD/JPY technical forecast
USD/JPY 4-hour chart

On the technical side, the USD/JPY price has broken above the 30-SMA, indicating a bullish shift in sentiment. At the same time, the RSI has broken above 50, indicating stronger bullish momentum. This shift came after the RSI made a bullish divergence. While the price made a lower low, the RSI made a higher one, showing weaker momentum. This allowed bulls to return to the market. 

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However, the price has to break above the 149.00 resistance level to confirm a new bullish trend. Moreover, it must start making higher highs and lows. On the other hand, if the 149.00 resistance holds firm, USD/JPY will return to retest the 147.00 support. A break below this level will make a lower low, confirming a continuation of the previous downtrend.

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