Trade Analysis & Reviews: 03.04.2025 - USD/JPY

03.04.2025 06:22 PM

USD/JPY – Analysis and Forecast

The Japanese yen is showing strong gains amid broad-based selling of the U.S. dollar, keeping the USD/JPY pair below the key psychological level of 147.00.

Investor concerns over the potential consequences of reciprocal tariffs imposed by U.S. President Donald Trump center around the risk of a disruption to the global trading system and negative impacts on the global economy. As a result, investors are avoiding risk and shifting capital into traditional safe-haven assets like the Japanese yen.

In addition, rising inflation in Japan is increasing expectations of a rate hike by the Bank of Japan, further supporting the yen. Adding to this is the anticipated Fed rate-cutting cycle driven by a tariff-induced slowdown in the U.S. economy, which has triggered a sharp drop in U.S. Treasury yields. This widening policy divergence between the Bank of Japan and the Federal Reserve is another factor driving capital flows into the yen.

From a technical perspective, the drop below the 100-period Simple Moving Average (SMA) on the 4-hour chart signals potential for further downside in USD/JPY. The break below the 147.00 level confirms the likelihood of the pair reaching at least the March low near 146.50.

On the other hand, any recovery attempt is likely to face resistance around the psychological 148.00 level. A break above this level could trigger a short-covering rally, pushing the pair toward the 148.65–148.70 area. Further upside would likely attract fresh sellers near the key 149.00 level or at the 100-period SMA on the 4-hour chart, thus limiting the pair's upside potential. The 100-period SMA on the 4-hour timeframe remains a critical pivot for determining trend strength.