USDJPY: US Tariffs Could Weigh on Trade, Sentiments - Ueda (2nd April)

Technical Analysis

• Current BoJ Policy Rate: 0.50% (highest since 2008)
• Rate Hike Probability (1st May meeting): 16% (down from 26% last week)
• Tankan Business Confidence Survey: Stable but cautious

Fundamental Factors Affecting the Japanese Economy

1. US Tariffs on Auto Imports
   • 25% tariff on Japanese auto exports could weigh heavily on Japan's trade balance.
   • Reciprocal tariffs from trading partners may impact Japan's global export demand.
   • Business & consumer sentiment could deteriorate, affecting spending and investment.
2. Government Response to Trade Uncertainty
   • Japan introduced 1,000 business consultation booths to support affected firms.
   • Authorities are closely monitoring the economic impact before adjusting policy.
3. Impact on BoJ's Rate Hike Path
   • Japan's economic outlook remains on track, but uncertainties are rising.
   • Before tariff news, economists expected a BoJ rate hike in June or July.
   • Rate hike bets for May dropped from 26% to 16%, indicating caution among traders.

Key Takeaway for Traders

• Short-term: Increased JPY volatility due to tariff uncertainties.
• Medium-term: BoJ may delay further rate hikes if trade sentiment worsens.
• Long-term: If Japan's economy remains resilient, BoJ could continue to tighten gradually later in the year.
• FX Impact: A dovish BoJ stance could weaken the JPY, while trade concerns could trigger safe-haven flows into the currency.

USDJPY – D1 Timeframe

The price action on the daily timeframe chart of USDJPY has recently been rejected off the confluence area of the supply zone and the 50-day moving average, leading to a bearish move that has now broken below the trendline support. From this point, prices may continue to slide lower, though we expect a retest of the turncoat trendline for confirmation.

USDJPY – H4 Timeframe

The 4-hour timeframe chart of USDJPY shows that the movement near the daily timeframe supply zone has formed an SBR (Sweep Break Retest) pattern, with the FVG and induced high visibly apparent. A retest of the supply zone at the shoulder of the SBR pattern is our cue for the onset of a bearish impulse.

Analyst's Expectations: 

Direction: Bearish

Target- 145.133

Invalidation- 151.231

CONCLUSION

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