The US Economic Outlook Is Mixed

The US economic outlook is mixed with warnings of stagflation risks. Fed Governor Barr recently noted that higher tariffs could affect supply chains, increasing inflation, slowing growth and raising unemployment. However, the Atlanta Fed GDPNow model retains a 2.30% estimate for Q2 growth. Recent data points to possible economic challenges if trade tensions rise.

Japan’s consumer spending improved, reflecting positively on the economy. The March rise in Overall Household Spending by 2.10% y/y reverses a prior decline, potentially reducing pressure on the Bank of Japan to intervene in the yen market.

USDJPY Support And Resistance Levels

The USD/JPY pair now hovers just above 145.00, following a retreat from its earlier attempt at breaking above 146.20. The failure to sustain those highs speaks volumes: the appetite to chase the dollar higher has waned, likely due to a widespread reassessment of macroeconomic risk. We saw the US Dollar Index sliding to 100.30 – a drop that coincided not only with mixed domestic data, but also with increased market hesitation around upcoming diplomatic and trade discussions with China, set to take place in Switzerland. There’s some caution creeping in around the durability and impact of US trade policy, particularly across key partnerships.

Meanwhile, commentary from Barr hasn’t made things easier for the dollar. His remarks related to the real-world impact of raised tariffs—pressures on supply chains, potential knock-on effects for inflation, slower output, and the risk of rising joblessness—all paint a careful picture. While not outright pessimistic, his tone leaves little ambiguity: should trade tensions escalate, macro headwinds won’t be confined to any one sector. And even though the Atlanta Fed holds its Q2 GDP forecast steady at 2.30%, sentiment is starting to fray around the edges. That flat outlook may not be enough to offset growing concern over persistent inflation and sluggish momentum in other indicators.

In Japan, data from March showed a stronger than expected rise in household spending. That 2.10% year-on-year jump helps offset earlier weakness and reduces the case for direct market interventions. This creates a degree of stability for the yen, especially ahead of May policy meetings. From our perspective, this development gives the yen a more defensive character, perhaps explaining why the pair has pulled lower despite earlier dollar strength.

Support levels around 144.82, 144.79, and 144.49 are shaping up to be key zones of congestion. If momentum continues to fade, these levels could become relevant rather quickly. Resistance overhead at 146.16 and 146.31 remains intact, while the 148.30 mark seems some distance away unless we get a swift shift in inflation expectations or economic guidance out of Washington.

Volatility is expected as the US prepares for delicate talks abroad and inflation commentary turns more direct. For those trading in delta-risk terms, keeping an eye on layered technical levels will become more effective now than predicting directional velocity. Option flows may also increase if spot levels flirt with either 145.00 or 146.00 again, bringing intraday spikes that challenge exposure limits.

We remain watchful of how implied volatility reacts, particularly near support clusters. A break below 144.80 would likely attract hedging flows, while a short squeeze above 146.20 could force an unwind of recent dollar shorts. Traders focused on gamma positioning should be cautious ahead of the week’s US inflation prints. Any upside surprise in CPI could shift forward guidance abruptly, especially if paired with hawkish tone shifts from Powell’s team.

In essence, this positioning reflects a detachment between headline US data and broader sentiment. There’s a sense that macro supports are thin, with investors cherry-picking metrics to drive near-term trading decisions. As always, we’ll be watching rate expectations and FX futures pricing for clues around aggressive capital positioning. Keeping risk contained around tight technical structures is, for now, the most responsive strategy.

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