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    Yen Weakens as Trade Tensions Ease

    February 4, 2025

    Key Points:

    • USD/JPY climbed to a high of 155.882 before closing at 155.256.
    • The yen briefly dipped to an intraday low of 154.008 before rebounding.

    The yen dropped beyond 155 per dollar, touching a session high of 155.882, as traders unwound safe-haven positions following President Donald Trump’s suspension of tariffs on Mexico and Canada.

    The temporary pause eased trade-related uncertainty, prompting a shift away from defensive assets like the yen and boosting demand for the U.S. dollar.

    USD/JPY Gains as Markets Bet on U.S.-China Trade Talks

    Traders are also growing optimistic that the U.S. and China may negotiate a trade deal to avoid the 10% tariffs on Chinese imports set to take effect today. The potential reduction in trade tensions has further weighed on the yen, which typically strengthens during periods of economic and geopolitical uncertainty.

    Japan’s Wage Data to Drive BOJ Expectations

    With the yen under pressure from improving risk sentiment, domestic traders are watching Wednesday’s wage data release, which could impact expectations for further Bank of Japan rate hikes.

    The BOJ raised interest rates in January, marking its first rate hike in 17 years, and has indicated it may tighten policy further if wage growth and inflation remain strong.

    If wage data meets or exceeds forecasts, it could support the yen by increasing expectations of another BOJ rate hike. Conversely, a weaker-than-expected wage report could add to yen weakness, reinforcing expectations of a cautious BOJ approach.

    Technical Outlook

    Resistance for USD/JPY remains at 155.882, with further upside potential if risk appetite continues to drive demand. A sustained break above this level could reinforce bullish momentum, pushing the pair higher in the near term.

    However, on the downside, support is seen near 154.439, with additional risk of a drop toward 154.008, the session low, should sentiment shift.

    Picture: The Ninja (USDJPY) consolidates after reaching 155.88 resistance, eyeing key support levels, as seen on the VT Markets app.

    The MACD signals slight bullish momentum, suggesting that USD/JPY may continue trading with an upward bias in the short term. While overall risk appetite remains a key driver, traders will be closely watching upcoming economic data for further direction.

    With safe-haven flows diminishing and BOJ policy remaining data-dependent, the yen may stay under pressure if wage figures disappoint.

    A strong wage report could offer temporary support, but a continued rally in the U.S. dollar could keep USD/JPY elevated.

    Traders will closely monitor U.S. inflation data, Federal Reserve commentary, and BOJ signals for further directional clues.

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