Insights 
VT 
USD/JPY has retreated to around 145.00 as the US Dollar corrected ahead of the US-China trade talks. US President Trump indicated a potential reduction of tariffs on China to 80%, adding focus on the upcoming discussions.
The USD/JPY pair did not maintain its position above the recent high of 146.20. The US Dollar Index (DXY) retracted to around 100.30 after initial gains.
Us China Trade Talks
The trade talks between the US and China are pivotal due to the ongoing tariff war. President Trump, through a social media post, suggested reducing tariffs on China to 80%.
Recently, the US Dollar has remained stable following the Federal Reserve’s stance on interest rates and the announcement of a US-UK trade deal. Meanwhile, the Japanese Yen has gained due to its status as a safe-haven currency amidst trade talk uncertainties.
Japan’s Overall Household Spending increased by 2.1% year-on-year in March, surpassing expectations. This follows a 0.5% decline in consumer spending in February.
The US Dollar, accounting for over 88% of global foreign exchange turnover, is influenced mainly by the Federal Reserve’s monetary policy decisions. Quantitative easing and tightening also affect its value, with each leading to differing impacts on the currency’s strength.
Federal Reserve And Monetary Policy
The USD/JPY’s pullback to the 145.00 area comes as attention shifts away from immediate dollar strength and towards broader uncertainty surrounding geopolitical trade shifts. The bounce off 146.20 subtly hints at a short-term exhaustion in bullish momentum, especially after dollar bulls lost their footing amid renewed trade tensions. With the Dollar Index slipping back toward 100.30, the loss of momentum reflects not just profit-taking, but a wider reassessment of risk.
Trump’s recent commentary on tariffs—particularly his suggestion of reducing China import levies to 80%—likely triggered this re-pricing. While still unofficial, this statement alone was enough to inject caution into currency markets and dampen dollar appetite. These trade negotiations, while familiar in tone, now carry fresh implications for central bank outlooks and monetary alignment.
The Federal Reserve’s current stance remains anchored, keeping rates on hold, which helped maintain a relatively firm dollar base over the past weeks. However, the temporary relief from the US-UK trade developments has been offset by rising uncertainty elsewhere. The Yen has naturally benefitted, supported by its status as a counter-cyclical asset bought in times of tension. When global negotiations introduce doubt, the Yen often acts as a hedge.
Japanese macro numbers add weight to that support. March’s positive surprise in household spending, rising 2.1% on an annual basis, reinforces the notion that domestic demand is attempting to recover. After February’s -0.5% dip, the rebound points to stabilising consumer confidence, which may lend strength to the currency in the short run without requiring wholesale changes in Bank of Japan policy.
From our standpoint, these developments shape the momentum outlook for the USD/JPY pair. The dollar’s global dominance—reflected in its role in over 88% of FX trades—means that Federal Reserve positioning continues to steer reaction, especially within interest-rate-sensitive pairs. However, with rates currently held steady, attention shifts to qualitative cues like language from policymakers and timing of balance sheet adjustments. Quantitative tightening policies can reinforce dollar positioning over the medium term, while even mild hints at easing, or dovish tones, tend to weigh on it.
Those engaged in leveraged FX positioning should weigh current levels alongside near-term volatility risks. A clean rejection just above 146.00 makes further upside less compelling without strong catalysts. While the backdrop remains dollar-positive in structural terms, the timing of entries and exits becomes more sensitive when global headlines, rather than rate differentials, move price action.
The Yen’s safe-haven bid will likely continue to provide a floor during episodes of doubt—particularly if trade negotiations stall or yield ambiguous outcomes. Traders should not overlook the role of event-driven catalysts when building short-term directional bets. The carry appeal of the dollar may offer support from lower levels, but coordination between monetary tone and geopolitical signals will be what truly determines directional confidence.
