During Wednesday's Asian trading session, the USD/JPY pair saw a slight decline to around 155.90, continuing the technical correction following gains from the previous trading day. The current price movement is primarily influenced by shifts in sentiment towards the US dollar, rather than being driven by yen-specific fundamentals.
In his State of the Union address, US President Donald Trump highlighted achievements in economic recovery and declining inflation. However, market participants paid closer attention to his stance on trade policy. President Trump indicated the possibility of imposing higher tariffs on countries that "violate trade agreements." An escalation in trade tensions could potentially weaken global growth expectations and dampen demand for US dollar-denominated assets.
Simultaneously, uncertainty surrounding Japan's monetary policy is limiting significant appreciation in the yen. The Japanese Prime Minister expressed concerns about further interest rate hikes during a meeting with the Bank of Japan Governor. While the Bank of Japan maintains its policy independence, the cautious stance from political leadership regarding the pace of rate increases has led markets to remain wary of the yen's potential upside.
Japan's Deputy Chief Cabinet Secretary stated that monetary policy decisions should be independently determined by the Bank of Japan, while the government will closely monitor foreign exchange market fluctuations to prevent excessive volatility. Overall, a weaker US dollar and uncertainty surrounding Japanese policy are creating a counterbalancing effect, leading the USD/JPY pair to maintain a range-bound movement for the time being.
From a daily chart perspective, USD/JPY remains within a high-level consolidation range. The area around 155.90 represents a short-term equilibrium zone between buyers and sellers, with price action failing to achieve a decisive directional breakout. Key resistance above is situated near 157.00, a region that combines a previous high with a significant psychological level.
A sustained break and hold above 157.00 could potentially open the door for further upward movement. Immediate support is seen at the 155.00 psychological level, which acts as a defensive zone for short-term buyers. A break below 154.20 could strengthen near-term bearish momentum, potentially leading the pair to test the 153.50 area.
Regarding technical indicators, momentum oscillators remain in neutral-to-strong territory, suggesting the market has not yet entered a trend reversal phase and is more likely to maintain its high-level consolidation structure.
The current USD/JPY price action reflects a typical scenario of macroeconomic forces counteracting each other. The US dollar is being pressured by trade policy uncertainties, while the yen is constrained by an unclear monetary policy path. The future trend of the pair hinges on two key factors: whether the US will implement more aggressive tariff policies, and whether the Bank of Japan will provide clearer signals regarding interest rate hikes.
Should policy divergence between the US and Japan widen further, USD/JPY could potentially re-enter a clear trending phase. Otherwise, the exchange rate is more likely to persist within its current high-range, sideways pattern.
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