USD/JPY faces a key technical level

The recently released Gross Domestic Product (GDP) data revealed that the US economy contracted by 0.3% in the first quarter of this year, defying expectations of 0.2% growth. This decline was primarily driven by uncertainty stemming from the new tariffs imposed by the Trump administration and the government’s efficiency-driven layoff campaign—both of which significantly curtailed consumer spending and contributed to the sharp slowdown in economic growth.

Today, the Bank of Japan announced its interest rate decision, maintaining the benchmark rate at 0.5%, in line with expectations. However, the Bank’s governor emphasized the ongoing uncertainty caused by global trade tensions and suggested that the central bank may raise interest rates if Japanese inflation continues to rise. He also noted that newly imposed tariffs could affect the timeline for inflation to reach its target level.

The Trump administration reported measurable progress in trade negotiations with several Asian nations, and President Trump voiced optimism about achieving a fair-trade agreement with China—an agreement aimed at fostering mutual fairness and safeguarding intellectual property rights.

Crucial US labour market data

Tomorrow, markets will be watching closely for key US labour data, the NFP,  that could influence the Federal Reserve’s monetary policy. In March, the US economy added 209,000 jobs, but unemployment also ticked up from 4.1% to 4.2%. Forecasts for April suggest the economy may add 125,000 jobs, with unemployment remaining steady at 4.2%.

It’s worth noting that the March Consumer Price Index (CPI)—the Fed’s preferred inflation measure—fell from 2.7% to 2.3%, bringing it closer to the 2% target. As a result, the Fed is likely to prioritise labour market data for upcoming decisions. If unemployment rises and job creation slows, it could support a shift toward interest rate cuts by monetary policymakers.

The USD/JPY pair may correct its downward trend

On April 22, the USD/JPY declined to a multi-month low falling below the 140.00 mark before rebounding due to profit-taking. The pair is now testing the high end of the current trading zone between 144.80 and 141.00. A daily close above the high end could attract additional buying interest and push the price toward 149.29. In this scenario, resistance levels at 146.78 and 147.95 should be monitored closely.

Levels to consider in the opposite scenario

If the USD/JPY pair fails to close above 144.80, it may indicate insufficient momentum for an uptrend, potentially leading to a decline toward low end of the current trading zone at 141.00. A daily close below this level would signal the likelihood of a continued drop toward 137.29. In that case, support levels at 139.57 and 138.60 should be watched carefully.

USD/JPY Daily Chart

Chart Source: ADSS Platform