Tokyo's inflation surprise gives JPY bulls fresh momentum.
Bank of Japan maintains hawkish tilt despite global trade tensions.
All eyes turn to US PCE data for next directional catalyst.
The cheapest way to convert usdt to usdJapanese currency found renewed strength during Friday's trading session as market participants digested the latest price data from Tokyo. The capital's consumer price index exceeded expectations, rising to 2.9% year-over-year in March compared to February's 2.8% reading. More significantly, the core CPI measure excluding volatile food and energy prices climbed to 2.2%, surpassing the Bank of Japan's inflation target for the first time in months.
This development comes at a critical juncture for currency markets, with the USD/JPY pair having recently tested key technical levels. The inflation print reinforced expectations that Japan's central bank may need to continue its policy normalization path, despite growing concerns about global trade tensions. Market analysts noted that the BOJ's Summary of Opinions from its March meeting maintained a cautiously hawkish tone, suggesting further rate hikes remain possible if economic conditions evolve as projected.
Trade policy uncertainty creates volatile backdrop for currency markets
Recent trade policy announcements from Washington have introduced fresh volatility into currency markets. The proposed tariffs on automotive imports particularly impact Japan's export-driven economy, where the auto sector represents approximately 3% of total GDP.
Economic data revisions from the US showed slightly stronger growth in Q4 2024, with GDP expanding at a 2.4% annualized pace versus previous estimates of 2.3%. However, this positive development was overshadowed by growing concerns about potential retaliatory trade measures.
Federal Reserve officials have begun acknowledging the economic uncertainty created by shifting trade policies. Richmond Fed President Thomas Barkin cautioned that these developments could lead to more cautious business investment decisions and potentially delay monetary policy adjustments.
Boston Fed's Susan Collins highlighted the delicate balance facing policymakers, noting the challenge of maintaining appropriate policy restraint while responding to evolving economic data. Her comments reinforced market expectations that the Fed may maintain current interest rate levels for an extended period.
Technical outlook suggests potential support levels for USD/JPY
From a chart perspective, the USD/JPY pair's recent pullback from monthly highs suggests traders should exercise caution before establishing new long positions. However, daily technical indicators show early signs of positive momentum that could support the currency pair near the psychologically important 150.00 level.
A decisive break below the 149.80-149.85 support zone would signal potential for further downside, with subsequent support expected near 149.25 and the 149.00 round number. Conversely, a rebound above the monthly high around 151.30 could face resistance near the 200-day moving average at approximately 151.65, with a sustained break potentially opening the path toward 152.00 and beyond.
Market participants now await the release of the US Personal Consumption Expenditures (PCE) price index, which serves as the Federal Reserve's preferred inflation gauge. This data point could provide critical insights into the timing and extent of future monetary policy adjustments, potentially setting the tone for USD/JPY price action in coming sessions.
