The Japanese Yen (JPY) found support against the US Dollar (USD) on Friday, bouncing from a nearly four-week low during the Asian session. Stronger-than-expected consumer inflation data from Tokyo reinforced expectations of further interest rate hikes by the Bank of Japan (BoJ), lending strength to the currency. However, the gains lacked strong follow-through as investors remained cautious amid global trade uncertainties.
BoJ Rate Hike Speculation Supports JPY
Data released earlier on Friday showed that Tokyo’s headline Consumer Price Index (CPI) rose to 2.9% in March, up from 2.8% in the previous month. The core CPI, which excludes fresh food prices, increased to 2.4% from 2.2%, while a further refined measure that strips out both food and energy climbed to 2.2%, surpassing the BoJ’s 2% target.
The BoJ’s Summary of Opinions from its March meeting indicated that rate hikes remain a possibility if economic and price trends align with forecasts. However, policymakers also expressed concerns about downside risks stemming from global trade tensions, advocating a cautious approach for the time being.
Trade Uncertainty and Safe-Haven Demand
The Japanese Yen also benefited from renewed risk aversion following US President Donald Trump’s announcement of a 25% tariff on imported cars and light trucks, set to take effect on April 3. This move raises concerns over its impact on Japan’s auto industry, which contributes approximately 3% to the country’s GDP.
Investors remain wary of Trump’s broader tariff policies, with reciprocal measures expected to be unveiled next week. Uncertainty surrounding the economic fallout from these policies continues to weigh on market sentiment, driving safe-haven demand for the JPY.
USD Awaits Key Inflation Data
Despite the pullback in USD/JPY, the US Dollar’s downside remains limited as traders await the release of the US Personal Consumption Expenditure (PCE) Price Index later on Friday. The inflation data will provide key insights into the Federal Reserve’s (Fed) potential rate-cut trajectory, influencing near-term USD movements.
Fed policymakers remain divided on the future rate path. Richmond Fed President Thomas Barkin warned that trade policy uncertainty could dampen consumer and business spending, prompting a more cautious Fed stance. Meanwhile, Boston Fed President Susan Collins suggested that the central bank may need to maintain restrictive policy longer than markets expect, given lingering economic risks.
Technical Analysis: USD/JPY Faces Resistance at 151.30
The USD/JPY pair remains on track for its third consecutive weekly gain, although caution is warranted for bulls. From a technical standpoint, the intraday pullback suggests some resistance near the 151.30 level, which aligns with the 200-day Simple Moving Average (SMA) at 151.65. A decisive break above this level could trigger further upside momentum, targeting the 152.00 and 152.50 regions, with a potential extension toward 153.00.
On the downside, the 150.00 psychological mark serves as key support. A break below 149.85-149.80 could shift momentum in favor of JPY bulls, potentially dragging the pair toward 149.25, followed by 149.00 and deeper support at 148.65.
Market Outlook
As investors monitor US inflation data and Trump’s next tariff moves, the USD/JPY pair remains at a critical juncture. While safe-haven flows and BoJ policy expectations provide support for the JPY, the Fed’s rate path and trade risks will determine the currency pair’s next move in the coming sessions.
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