The USDJPY pair is declining as the US dollar weakens. Recent bearish catalysts include dovish comments from Fed’s Bowman, hinting at possible rate cuts if inflation stays low.

The market was also influenced by Iran’s actions, reminiscent of past events, and President Trump’s discussions about quickening the announcement of a new Fed Chair. Month-end flows could be contributing to the dollar’s weakness as well.

Japan’s Monetary Policies And Trade

For Japan, the yen remains stable with the BoJ keeping rates at 0.5% and adjusting the bond tapering plan. The BoJ’s focus remains on the US-Japan trade deal and inflation.

On a daily chart, USDJPY is nearing the 142.35 level, where buyers may enter. Sellers aim for a break below this for a move towards 140.00. On the 4-hour chart, a fall below 144.25 suggests further bearish momentum towards 142.35. Conversely, if it rises above this, buyers might push it towards 146.28.

The 1-hour chart shows a downward trendline indicating bearish momentum. A rise above the trendline may encourage buyers, while sellers focus on a drop past 144.25. Upcoming data includes US Jobless Claims, US Q1 GDP, Tokyo CPI, US PCE price index, and Michigan Consumer Sentiment.

The earlier section gives a clear view of how USDJPY has been moving in recent sessions. The decline points to a softening dollar, mostly prompted by commentary from Bowman of the Federal Reserve that hinted at interest rate cuts—should inflation maintain a subdued pace. That alone shifts market expectations towards a less aggressive monetary stance in the US, which has historically had a dampening effect on the dollar across major pairs.

There was also a geopolitical layer to consider. Iran’s recent movements, drawing parallels to former events, added an anxious tone to risk sentiment. Meanwhile, the mention of an early Federal Reserve Chair announcement from Trump has thrown another variable into the mix. These narrative shifts, when combined with possible month-end portfolio rebalancing, are part of what’s driven recent downward pressure on the greenback.

From Tokyo, there hasn’t been much in the way of surprises. Interest rates were left unchanged by the central bank, which also made slight changes to the pace of bond purchases. Kanji’s team appears to be fixated on domestic inflation trends and external urgencies stemming from the US trade relationship, though their handle on the yen’s relative calmness hints at confidence in their current stance.

Key Trading Levels

If we break into the levels where traders tend to take decisions, the 142.35 mark has emerged again as a possible area for bids. There seems to be genuine buying interest parked around that level, quite possibly tied to prior demand zones observed across smaller timeframes. A clean breach under it, though, opens up the path towards 140.00—there’s not much historical friction in between, which might mean the pair could move lower with less resistance if that floor gives way.

Now, zooming in to the four-hour chart shows a pattern of sustained downside action below 144.25. That level has since been acting as a sort of gateway; staying under it means bearish momentum continues to gain ground. If price does reclaim above it, it’s likely markets will rotate upward towards 146.28—though that path is longer and would need fresh US bullish drivers.

On shorter timeframes, we’re continuing to see lower highs form beneath a downward trendline that’s been quite well-respected. It’s acted like a gravity pull. However, sharp moves above that trendline—should they occur—might provide short opportunities for bullish rotations. We’ve already seen responsive sellers defending levels just above 144.25. Drops below it, particularly in stronger volume, will likely see more short positions come in, with eyes aimed once more at the next major demand area down near 142.35.

There’s also no shortage of economic data on the calendar. Any material deviation in this week’s US GDP data or the PCE price reading could tilt inflation expectations one way or the other. This would prompt recalculation of positioning across the board. Tokyo’s CPI will be watched for signs that domestic inflation might reaccelerate, which could add new energy to policy discussions in Japan.

We’ll be watching for S&P revisions to sentiment indicators like the Michigan release too. Consumer sentiment often leans heavily into dollar appetite mid-week, and when combined with PCE shifts, can either reinforce or undermine expectations around what’s next from the Fed.

We keep to our technical maps, but macros are carrying heavier weight than usual. When inflation beats or lags consensus, entries and exits shift fast. We take that into account particularly with short-dated trades or any exposure tied to US dollar strength.

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