On the first trading day of the week, the Japanese yen maintains its positive momentum against the weakening U.S. dollar.
This movement is driven by hawkish expectations regarding Bank of Japan's (BoJ) monetary policy, as the central bank appears ready to raise interest rates again. Recent Japanese economic data showed that real cash earnings fell by 1.8%, reflecting persistent inflationary pressures. Additionally, last year's sharp wage growth could continue in 2025, reinforcing the case for monetary tightening. This, in turn, is driving up Japanese Government Bond (JGB) yields, making the yen a more attractive option for investors.
Moreover, uncertainty surrounding U.S. trade policy under President Donald Trump and global trade tensions continue to enhance the yen's status as a safe-haven asset. At the same time, the U.S. dollar remains near multi-month lows after a weaker-than-expected U.S. employment report, reinforcing expectations that the Federal Reserve may cut rates multiple times this year. This presents additional challenges for the USD/JPY recovery, suggesting that the path of least resistance remains to the downside.
A break below the key 147.00 level will serve as a bearish signal, extending the two-month downtrend. However, traders should note that the Relative Strength Index (RSI) on the daily chart is approaching oversold territory, suggesting the need for caution. It may be prudent to wait for a short-term consolidation or a minor pullback before initiating further short positions.
If the USD/JPY pair continues to weaken, the next support level will be at 146.50, followed by a test of the psychological 146.00 mark. A break below this level could trigger a further decline toward the 145.25–145.20 zone, with additional downward targets at 145.00 and 144.80–144.75.
On the other hand, any attempts at a recovery may face resistance around 148.00. If the pair rises above this level, the 148.65–148.70 zone could offer a selling opportunity. However, a strong breakout beyond this range might trigger a short-covering rally, potentially driving the pair toward the 149.00 level and further toward the key psychological resistance at 150.00.
