- The USD/JPY outlook indicates a recovering dollar as Treasury yields climb.
- US yields rose as market participants looked forward to more Trump tariffs starting in April.
- The BoJ will keep hiking interest rates if inflation continues to rise.
The USD/JPY outlook indicates a steady dollar as Treasury yields climb ahead of Trump’s April tariffs. Meanwhile, Bank of Japan’s Governor Ueda emphasized plans to keep hiking rates if the central bank’s inflation target is hit.
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The USD/JPY eased slightly but held near recent peaks as Treasury yields rebounded. Yields rose as market participants looked forward to more Trump tariffs starting in April. The US is set to impose tariffs on Canada, Mexico and automobiles. At the same time, Trump promised a reciprocal tariff that would affect more countries relying on trade with the US.
These tariffs will increase the cost of goods in the US, which will likely drive inflation higher. Such an outcome would force the Fed to keep interest rates high, supporting yields and the dollar. However, these tariffs will also ignite more trade wars, hurting the global economy. At the same time, a decline in trade between the US and its partners could plunge the country into a recession.
Elsewhere, BoJ governor Kazuo Ueda said the central bank will keep hiking interest rates if inflation continues rising. However, at last week’s meeting, he noted that there would be caution due to tariff uncertainty.
USD/JPY key events today
- US flash manufacturing PMI
- US flash services PMI
USD/JPY technical outlook: Bulls retest recently broken channel support
On the technical side, the USD/JPY price has broken out of its bullish channel after meeting the 150.01 key resistance level. Initially, the price traded above the 30-SMA, consistently making higher highs and lows.
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However, this changed when bulls reached the 150.01 resistance. Here, the price made a bearish engulfing candlestick pattern, indicating a looming sentiment shift. At the same time, this candle broke below the 30-SMA and the channel support line. However, soon after the break, the price rebounded to retest the recently broken channel line, pushing it back above the SMA.
If bears return, USD/JPY will drop to make a lower low, indicating a new bearish trend. Such a move would allow bears to retest the 147.02 support level. Meanwhile, if this was a false breakout, the price will soon break above the 150.01 resistance to continue the uptrend.
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Saqib Iqbal
