The US dollar continues to lose ground against the Japanese yen, with investors selling the greenback on elevated fears over the trajectory of the US economy. The USDJPY currency pair was down by 0.9% at the opening of the New York session- its largest daily drop in nearly a month to trade at 142.58 at the time of writing.
Dollar headwinds from multiple directions
The dollar’s latest decline was triggered by a surprise rise in Japan’s April inflation rate, which printed out at 3.5%, the highest in two years. That has raised the prospect of a tighter monetary regime by the Bank of Japan through the second quarter.
Meanwhile, yields on 30-year US treasury bonds have been on the ascent in recent days, and hit their highest level since recession-era 2007 as concerns mount over US debt sustainability. This scenario doesn’t augur well for US dollar sentiment and adds downward pressure. Friday’s decline was the seventh loss in the last ten trading sessions, underling the bearish hold of the USDJPY trading pair.
US President Donald Trump has threatened a new 50% tariff on all imports from the European Union beginning June 1 and 25% tariff on iPhones manufactured outside the United States. Trump’s comments, made on Friday, ruffled the markets, triggering renewed fears over the global economy. He had previously cut the initial 20% tariffs on a basket of EU products by half until July 8. Such a tariff regime will likely add strain on the US economic outlook, limiting the upside for USDJPY.
USDJPY Prediction
USDJPY momentum signals the likely continuation of the downside below 143.02. The pair will likely find initial support at 142.44. An extended control by the sellers will push the action lower to test the second support at 142.00.
Conversely, the momentum could shift to the upside if USDJPY goes above 143.02. In that case, the pair is likely to go higher and test 143.66. Breaking above that level will invalidate the downside narrative, and the resulting momentum could extend gains to test 144.16.
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