USDJPY stayed on the ascending trajectory on Monday during the European session as a blend of rising tariff uncertainty and relatively stable US macroeconomic data provided tailwinds. The currency pair was at 150.85 at the time of writing, staying on course to register the fourth successive daily gain after going up by 0.16%.
US tariffs against imports from Canada and Mexico will take effect this week, signaling the prevalence of high inflation rates. President Donald Trump announced last week that the 25% tariffs would kick in this week, halting a month-long pause that had given hope of a negotiated solution.
Trump’s tariff suspension was based on America’s two neighbours’ ability to institute certain border control measures against illegal immigration and drug infiltration. However, it seems that the US is not satisfied with the measures taken by Mexico and Canada, leaving room for anxiety in the markets. In addition, Trump announced the doubling of 10% tariffs on imports from China.
Analysts say that high tariffs on imports could trigger a sharp spike in inflation rates, necessitating the Fed to keep interest rates elevated and favouring the dollar’s upside. However, the USDJPY upside will face a challenge if the Bank of Japan raises interest rates as highly expected in the first quarter of the year.
Japan’s economy has shown strong signs of recovery, with the February manufacturing PMI printing out at 49.0 to beat the forecast estimate of 48.9. That set up favours increased yields by the Japanese treasury bonds, bringing tailwinds to the yen.
USDJPY Prediction
USDJPY pivots at 150.47 and the upside will prevail if the pair stays above that level. Immediate resistance is likely to be at 151.32. Breaking above that level could strengthen the upward momentum and potentially test the second resistance at 152.00.
On the other hand, breaking below 150.47 will signal a shift in the momentum to the downside. If that happens, USDJPY willl likely find initial support at 149.97. The upside narrative will be invalid if the price breaks below that level. In addition, the resulting momentum could extend losses and test the second support at 149.42.
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