the yen loses its safe-haven appeal :: InvestMacro

By RoboForex Analytical Department 

The USD/JPY pair remains in an uptrend, trading around 145.00 on Wednesday and nearing a two-week low for the yen. The Japanese currency is under continued pressure as demand for safe-haven assets fades, fuelled by growing optimism over US-China trade negotiations.

Trade optimism undermines yen demand

Positive signals from the US-China trade talks have eased market tensions. After two days of meetings, both delegations described the dialogue as productive, with discussions expected to continue today. Reports suggest that diplomats have reached a preliminary agreement on implementing the Geneva Consensus. Under the agreement, China could ease export restrictions on rare earth metals, while the US might loosen controls on advanced technology sales to China.

This improving external backdrop has diminished the appeal of the yen as a safe-haven asset, contributing to the continued strength of the dollar against it.

Domestically, Japan’s producer price inflation rose 3.2% y/y in May, marking the slowest growth in eight months. This suggests easing cost pressures in production, which could reduce the urgency for aggressive monetary tightening.

Still, Bank of Japan Governor Kazuo Ueda reaffirmed in parliament on Tuesday that the central bank remains prepared to implement a new rate hike, provided there is confidence in the sustainability of core inflation around the 2% target.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY is moving upwards from support at 144.00, targeting 145.50, which is expected to be reached today. After hitting this level, a pullback to 144.00 is anticipated. Should the pair break below 144.00, the next move may extend to 142.20, with the possibility of continuing further to 140.50. A breakout above 145.50 would open the door to 146.25. The MACD indicator supports the bullish view, with its signal line above zero and pointing sharply upwards within the histogram zone.

On the H1 chart, the pair is building an upward wave structure towards 145.50, which is likely to be fulfilled today. A corrective move to 144.00 is expected to follow. The pair remains in a broad consolidation range around these levels. The Stochastic oscillator also confirms this scenario, with its signal line above 50 and heading towards 80, indicating continued upward momentum in the short term.

Conclusion

USD/JPY continues to rise as risk appetite grows, and trade-related optimism diminishes the appeal of the yen. While positive domestic data and a willing BoJ support the yen longer term, the near-term technical setup remains bullish. Key resistance lies at 145.50 and 146.25, while a potential pullback could find support at 144.00, with deeper levels at 142.20 and 140.50 if the trend reverses.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.