USD/JPY technical analysis. Examining the impact of US trade tariffs and Bank of Japan policy on the currency pair. Key levels and trend outlook.
Chart of the week: USDJPY
We have featured the USD/JPY in our prior “Chart of the week – Further potential JPY strength as USD/JPY breaks below 200-day MA” published on 10 February 2025.
Since our last analysis, the USD/JPY has shaped the expected corrective decline, plummeting by 8.3% to an intraday low of 139.89 on 22 April, its lowest level since 16 September 2024.
The Japanese yen has strengthened against the US dollar over the past eight weeks, driven by rising uncertainty and the erratic implementation of US trade tariffs, which continue to undermine confidence in the US “exceptionalism” narrative.
Fundamentally, Japan's inflation has exceeded the Bank of Japan’s (BoJ) 2% target for three consecutive years, and major corporations are offering higher wage hikes in 2025. In response, the BoJ has signalled a willingness to continue raising interest rates.
However, the adverse effects of US trade tariffs may derail the BoJ’s policy normalization path. According to a Reuters report on 17 April, sources indicate the BoJ may lower its fiscal 2025 economic growth forecast, which is currently at 1.1%, in its updated quarterly report following a 1 May policy meeting.
As a result, market consensus now expects the BoJ to pause rate hikes until June, with a potential 25-basis-point hike resuming in Q3. In the meantime, the USD/JPY has rebounded by 2.7% from its 22 April low, closing at 143.68 in the 25 April US session, reflecting the market’s pricing of a more cautious BoJ in the near term.
Fig 1: USD/JPY medium-term trend as of 25 Apr 2025 (Source: TradingView)
Let’s review the latest USD/JPY technical chart to assess its trend bias and key levels to watch for the week.
The price actions of the USD/JPY are still trading below its 20-day and 50-day moving averages, which suggests that its medium-term downtrend phase from its January 2025 swing high remains intact.
In addition, the 4-hour RSI momentum indicator is now at a level of 64, which is approaching its overbought zone (above 70). This observation suggests that the ongoing rebound from its 22 April low of 139.89 may be reaching an inflection level soon, where a potential bearish reversal may materialise.
Watch the 145.50 key medium-term pivotal resistance in the USD/JPY, and a break below the 142.30 intermediate support may revisit the 22 April swing low area of 140.30/140.00. A break with a daily close below 140.00 exposes the next medium-term support of 138.90 next.
On the flip side, a clearance above 145.50 invalidates the bearish scenario for the next medium-term resistance to come in at 147.30/80 (also the 50-day moving average).
