The US dollar is facing renewed downside pressure as traders increasingly price in a September Federal Reserve rate cut—probability now hovering near 90%—following softer employment data and growing uncertainty over Fed leadership under potential Trump appointees. The focus now turns to this week’s US CPI release and developments in US–China–Japan tariff policies, both of which could set the tone for USDJPY’s next move.
On the Japanese front, optimism is building after news of a US–Japan trade deal aimed at lowering tariff exposure and boosting bilateral investment. The agreement has lifted Japanese equities, slightly easing recession concerns and lending some stability to the yen.
USDJPY recently retreated from its multi-month resistance band at 149.00–149.60, marked by bearish divergence and overbought technical readings. Price action now hovers near 146.70—the 38.2% Fibonacci retracement level. A decisive break below 146.70 could accelerate a decline toward 145.55 and potentially 143.00–144.00. Conversely, holding this support could spark another push toward 149.00–150.00, though upside will likely remain capped unless US inflation beats expectations or Fed cut bets ease.
1. US macro and Fed policy shifts
The US dollar is under renewed pressure as markets price in a higher probability of September Fed rate cuts—now around 90%—driven by soft employment data and uncertainty over Fed leadership under Trump appointees. Key upcoming US CPI data and tariff developments are poised to influence the pair’s near-term trajectory.
2. Japanese free trade easing & equity strength
News of a US–Japan trade deal reducing tariff exposure and boosting Japanese investment helped ease recession fears, supporting domestic equities and slightly stabilizing the yen.
3. Technical structure & trading range
USDJPY recently reversed from its multi-month ceiling around 149.00–149.60, where bearish divergence and overbought signals emerged. A pullback toward 146.70 (Fibonacci 38.2% support) appears likely; holds above this level could set up another leg higher toward 149–150, while a break below 145.55 would open downside risk to 143–144.
Summary
USDJPY trades between 146.7 and 149.0, with upside capped by Fed easing risks and technical resistance. A break below 146.7 could signal a deeper pullback, while sustained support may preserve bullish momentum pending US inflation and trade developments.
USDJPY H3 Timeframe
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On this USDJPY 3-hour chart:
Price consolidates after a strong bullish impulse leg, forming a contracting triangle pattern (higher lows and lower highs) just below the 147.85 zone. This pattern often signals a continuation in the direction of the preceding trend — in this case, bullish.
Before this consolidation, we saw multiple impulsive rallies (highlighted by the arrows) breaking through key resistance levels, with prior breakout zones now holding as support. The most notable support cluster lies in the 146.00–146.30 area (highlighted by the black box), which aligns with previous breakout points and a potential liquidity pool.
If price breaks above the triangle’s upper boundary, it could trigger another bullish leg, with the measured move target pointing toward the 150.30–150.60 area. However, if the price breaks down, a retest of the 146.00–146.30 zone is likely before bulls consider another push higher.
Key bullish confluences:
- Contracting triangle after an impulsive rally.
- Strong multi-layered support at 146.00–146.30.
- Trend context still favors upside continuation.
Direction: Bullish
Target- 150.072
Invalidation- 145.575
CONCLUSION
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