Japanese Yen faces mixed signals amid BoJ speculation and USD recovery
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The Japanese Yen (JPY) eased off its one-month high against the US Dollar (USD) during early European trading on Tuesday, with the USD/JPY pair stabilizing above the mid-155.00 range. Mixed signals, including a modest USD recovery and rising bets on a Bank of Japan (BoJ) rate hike, have created a seesaw dynamic for the pair.
Key market drivers
US dollar recovery and trade concerns
The USD regained ground from a two-week low following US President Donald Trump’s announcement of potential 25% tariffs on Canada and Mexico, scheduled for early February. Trump’s comments revived fears of a global trade war and inflationary pressures, potentially limiting the Federal Reserve’s ability to pursue further rate cuts.
Hawkish BoJ expectations
Recent remarks from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino have bolstered market expectations for a rate hike, with an 80% probability priced in. Broader inflationary trends and hawkish policy speculation provide support for the Yen, despite the risk-on sentiment undermining its safe-haven appeal.
Lack of major economic data
With no significant economic releases from Japan or the US on Tuesday, traders are focused on the upcoming two-day BoJ policy meeting starting Thursday. This event is anticipated to play a pivotal role in shaping the near-term trajectory of the Yen.
Technical analysis
Support levels
The USD/JPY pair continues to defend the lower boundary of a multi-month ascending channel, with key support at
The 155.00 mark
Intermediate support at 154.50-154.45
The 154.00 round figure and mid-153.00s region.
A breakdown below these levels could accelerate the pair’s decline, potentially targeting the 153.00 zone.
Resistance levels
Immediate resistance is seen at
The 156.25 region, followed by 156.58-156.60
The 157.00 mark and the 157.25-157.30 area
Higher targets include 157.60, 158.00, and the multi-month peak of 159.00 touched on January 10.
Market outlook
While the BoJ’s potential rate hike and broader inflationary pressures support the Yen, Trump’s trade policies and a modest USD recovery create a complex trading environment for USD/JPY. The pair’s resilience above key support levels highlights uncertainty, with traders awaiting clearer signals from the BoJ meeting later this week.
Key market drivers
US dollar recovery and trade concerns
The USD regained ground from a two-week low following US President Donald Trump’s announcement of potential 25% tariffs on Canada and Mexico, scheduled for early February. Trump’s comments revived fears of a global trade war and inflationary pressures, potentially limiting the Federal Reserve’s ability to pursue further rate cuts.
Hawkish BoJ expectations
Recent remarks from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino have bolstered market expectations for a rate hike, with an 80% probability priced in. Broader inflationary trends and hawkish policy speculation provide support for the Yen, despite the risk-on sentiment undermining its safe-haven appeal.
Lack of major economic data
With no significant economic releases from Japan or the US on Tuesday, traders are focused on the upcoming two-day BoJ policy meeting starting Thursday. This event is anticipated to play a pivotal role in shaping the near-term trajectory of the Yen.
Technical analysis
Support levels
The USD/JPY pair continues to defend the lower boundary of a multi-month ascending channel, with key support at
The 155.00 mark
Intermediate support at 154.50-154.45
The 154.00 round figure and mid-153.00s region.
A breakdown below these levels could accelerate the pair’s decline, potentially targeting the 153.00 zone.
Resistance levels
Immediate resistance is seen at
The 156.25 region, followed by 156.58-156.60
The 157.00 mark and the 157.25-157.30 area
Higher targets include 157.60, 158.00, and the multi-month peak of 159.00 touched on January 10.
Market outlook
While the BoJ’s potential rate hike and broader inflationary pressures support the Yen, Trump’s trade policies and a modest USD recovery create a complex trading environment for USD/JPY. The pair’s resilience above key support levels highlights uncertainty, with traders awaiting clearer signals from the BoJ meeting later this week.