- Trump emphasized his plans to impose tariffs on Canada and Mexico.
- The US economy grew by 2.3%, compared to estimates of 2.7%.
- The yen is set to end the week with an over 1.5% gain.
The USD/JPY price analysis indicates an increasing likelihood of a 25% US tariff on goods from Mexico and Canada, supporting the dollar. Meanwhile, the yen eased at the end of a strong week as BoJ remarks weighed.
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The dollar rebounded Thursday as US President Donald Trump emphasized his plans to impose tariffs on Canada and Mexico. Market participants have remained cautious, anticipating the proposed Trump tariffs. If they come on February 1 as promised, it will open the door for more tariffs, boosting the US currency. These tariffs will discourage trade between these countries and likely cause tensions. However, production and demand for US goods will increase, boosting the economy.
Meanwhile, traders also focused on US data, which showed a smaller-than-expected economic expansion. According to the report, the economy grew by 2.3%, compared to estimates of 2.7%. However, the report also revealed a significant increase in consumer spending.
Meanwhile, the Bank of Japan chief said on Friday that the central bank must keep rates low to allow underlying inflation to increase. His remarks led to a retreat in the yen. However, Japan’s currency is set to end the week with an over 1.5% gain. The yen has soared since the BoJ increased borrowing costs last Friday.
USD/JPY key events today
- Core PCE Price Index m/m
- Employment Cost Index q/q
USD/JPY technical price analysis: Bulls challenge the 30-SMA resistance
On the technical side, the USD/JPY price has rebounded after failing to break below the 154.01 support level. However, the price still trades below the 30-SMA, showing bears are in the lead. Additionally, the RSI favors bearish momentum below 50.
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Currently, the price is retesting the 30-SMA resistance. If it holds firm, USD/JPY will return to the 154.01 support. A break below this level will confirm a continuation of the downtrend. On the other hand, if bullish momentum surges past the 30-SMA, the price will likely retest the 156.51 resistance level. Moreover, the break would signal a shift in sentiment to bullish.
Meanwhile, to confirm a new bullish trend, the price would have to break past the 156.51 resistance and start making higher highs and lows.
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