USD/JPY recoups some losses – what’s next?

More tariffs or exemptions?

President Trump has announced plans to impose additional tariffs soon. However, he indicated that some countries may be exempt, with the next tariff announcement expected on April 2.

The US president also expressed his intention to impose tariffs of up to 25% on any country purchasing oil and gas from Venezuela, including China. Additionally, he plans to levy tariffs on imports of pharmaceuticals and automobiles, raising concerns among major Japanese automakers such as Toyota.

Trump has long criticised the US trade deficit with Japan, arguing that both China and Japan have an “unfair” competitive advantage due to currency manipulation and depreciation, which makes their exports more competitive—a claim Japan’s government has denied.

Under the “America First” policy, Trump criticised Europe and Japan for relying on the United States for defence, stating that this situation will change. He emphasised that each country must increase its defence budget, opening the door for negotiations to purchase US weapons. In such cases, tariff exemptions could be considered once a trade agreement is reached.

US Dollar and market anticipation

The US Dollar Index climbed in early trading this week, driven by a decline in the euro. The drop followed the release of preliminary Purchasing Managers’ Index data for the services sector, which came in lower than expected at 50.4, compared to the projected 51.2.

Markets are now closely watching key economic data for the US dollar this week, particularly the February Personal Consumption Expenditures (PCE) Index, the Federal Reserve’s preferred inflation gauge. Higher-than-expected figures could bolster the US dollar, as they may hinder the Fed’s ability to implement interest rate cuts.

USD/JPY – Poised to test multi-week highs

On March 20, the USD/JPY corrected its downward trend, forming a higher low at 148.17. This week, prices broke above the downtrend line, originating from the January 10 high. If they continue to hold above this trend line, they could move toward the February 12 high of 154.79.

Currently, the pair is testing the high end of the trading zone between 151.90 and 146.74. A daily close above 151.90 could trigger an upward movement, potentially pushing prices toward 156.79. In this scenario, resistance levels at the 50-day moving average and the February 12 high should be closely monitored.

Key levels to watch in a bearish scenario

If prices fail to break and remain above the high end of the current trading zone at 151.90, it would indicate a lack of momentum to sustain the uptrend. This could encourage traders to push prices toward the low end of the above-mentioned trading zone at 146.74. In this case, the support level at the March 20 low should be considered.

USD/JPY price – Daily Chart

Chart Source: ADSS Platform