USD/JPY Buyers Challenge a Key Resistance Level Amid Dollar Strength
Market Overview
The US dollar continues its rally across global currency markets, reaching a multi-year high against several major currencies. During Asian trading, the greenback surged to its strongest level against the Chinese yuan, hit a 22-year high versus the Canadian dollar, and advanced to levels not seen since 2022 against the Mexican peso.
This broad-based dollar strength follows heightened concerns over trade tensions after President Donald Trump imposed new tariffs on Canada, Mexico, and China. The move has triggered significant risk aversion in equity markets, with Asian indices declining and European and US stock futures falling sharply. As market sentiment shifts toward safe-haven US dollar, the Japanese yen, has come under pressure.
Technical Analysis
On the 4-hour chart, USD/JPY is testing a short-term descending trendline as buyers attempt to extend the pair’s recovery from the recent low at 153.785. The dollar’s renewed strength has pushed the pair toward a critical resistance level at 155.974, which marks the previous swing high. A successful breakout above this level could accelerate bullish momentum, potentially targeting 156.569, 157.327, and 158.163 in the coming sessions.
Momentum indicators support the bullish case. RSI is in the buying zone, reflecting an increase in buying pressure, while MACD remains in positive territory, indicating that bullish momentum is intact. However, moving averages provide mixed signals, suggesting that traders should watch for confirmation of a breakout before committing to a strong bullish stance.
If sellers regain control, a failure to break 155.974 could lead to a retracement toward immediate support at 155.138. A decisive break below 153.785 would invalidate the bullish structure, shifting momentum back in favor of yen buyers.
Key Support and Resistance Levels
- Resistance Levels: 155.974, 156.569, 157.327, 158.163
- Support Levels: 155.138, 153.785
Fundamental Factors
The latest wave of tariffs imposed by the Trump administration has heightened global trade uncertainty, increasing demand for the dollar as a safe-haven asset. The expectation that higher import costs could push inflation higher is also fueling speculation that the Federal Reserve may keep rates elevated for longer than expected.
While the yen typically benefits from risk-off sentiment, it has struggled to gain traction due to widening monetary policy divergence. The Federal Reserve’s relatively hawkish stance contrasts with the Bank of Japan’s ultra-loose monetary policy, limiting the yen’s ability to capitalize on global risk aversion.
Upcoming Key Economic Events
ISM Manufacturing PMI (Monday) – A stronger-than-expected reading could reinforce US dollar strength.
Construction Spending Data (Monday) – Higher construction activity could signal resilience in the US economy, supporting hawkish Fed expectations.
Speech by Raphael Bostic (Monday) – The Atlanta Fed President’s comments could provide further insight into the Fed’s rate outlook.
Conclusion
The US dollar remains in a dominant position, with USD/JPY buyers aiming for a breakout above 155.974 to extend bullish momentum toward 156.569 and beyond. However, failure to break resistance could trigger a pullback toward key support at 153.785.
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