The US dollar saw a boost due to unexpected positive news on US-China tariff relief, causing a revision in interest rate expectations. Markets anticipate a 50 basis point easing by the Fed by year-end, compared to 120 basis points amid April’s peak fears. This repricing led to strength in the USD, though some of these gains have receded against major currencies. Future USD performance may depend on economic data or hawkish statements from the Fed.

The Japanese Yen, driven mainly by global sentiments, lost ground despite expectations for another rate hike this year. The currency, along with the Swiss Franc, serves as a safe haven, though positive market sentiments have recently weakened it.

Technical Analysis Of Usd Jpy

In terms of technical analysis, USDJPY saw a retreat below a major trendline on the daily chart, creating potential for both bullish and bearish scenarios. On the 4-hour chart, the price filled Monday’s gap, which could serve as support. The 1-hour chart indicates bearish momentum, challenging buyers to break higher to reach the 151.00 level. Upcoming data include US Jobless Claims, PPI, Retail Sales, and speeches from Fed officials, with Japan’s Q1 GDP and US consumer sentiment survey also influential.

What we’re seeing in the earlier sections is a revaluation of rate expectations following unexpected optimism around the easing of US-China tariffs. Originally, the market had been pricing in much more aggressive Federal Reserve interest rate cuts, driven largely by anxieties spread through April. The repricing from 120 to 50 basis points of potential cuts by year-end represents a clear shift in sentiment—some of the panic has softened. That gave the dollar a noticeable lift, since any delay or reduction in rate cutting tends to bolster a currency.

That said, part of the dollar’s move has already eased. The strength wasn’t evenly sustained across all peers, suggesting that market participants are waiting for fresh direction. From where we sit, the next batch of US macro releases now take on even greater weight. Retail Sales and Producer Price Index readings, in particular, are good barometers of consumer strength and inflation trends. Any upside surprises in these reports could cause another readjustment in rate expectations—especially if coupled with firm language from policymakers in their scheduled speeches.

Japanese Yen Out Of Favor

In contrast, the Japanese Yen has been out of favour, despite ongoing expectations for tighter domestic policy. Its role as a traditional fallback in uncertain times seems to be fading this week, mostly because broader risk appetite has held up well. When markets are feeling more confident, demand for safe havens dries up, and that’s exactly what’s happened to the Yen and also to the Franc.

From a technical perspective, USDJPY gives us mixed signals. The pair broke beneath a long-standing trendline on the daily chart, which often precedes more two-way action. Buyers and sellers are now likely regrouping. On the 4-hour timeframe, the pair closed a previous price gap from Monday—levels that tend to act like magnets or areas of defence. Shorter-term charts show sellers pressing from above, with downward momentum present near minor resistance. If the pair can’t breach 151.00 convincingly, there’s a good chance we’ll see another test lower.

Looking out further, we have some clear markers to work with in the coming days. Fed commentary always has the chance to jolt markets when there’s disagreement internally over future guidance. Pair that with consumer sentiment figures out of the US, and the picture becomes more dynamic. Over in Japan, Q1 GDP will tell us whether their domestic recovery has any legs. Any upside scenario could give the Yen support it currently lacks. We’re watching closely.

Adjustments aren’t always linear, and we don’t expect reaction to data to be symmetrical. What matters more is how those reports shift expectations, rather than the headline prints themselves. The sensitivity of the market to incremental changes is now fairly high, which tells us traders are likely to remain active on even moderately surprising data.

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