The Japanese Yen (JPY) continued to exhibit strong upward momentum during the Asian trading session on Thursday, as escalating geopolitical tensions and renewed trade uncertainties fueled a global flight to safety. 

These factors, coupled with diverging monetary policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed), have placed notable downward pressure on the USD/JPY pair, pushing it below the psychologically significant 144.00 level. Aurudium’s experts unpack the intricacies of this subject in their latest piece.

Safe-Haven Appeal Boosts the Yen

Investors are showing increased demand for safe-haven assets such as the Japanese Yen, as fresh geopolitical flashpoints weigh on risk appetite. 

The trigger was a provocative statement from the US President, who threatened unilateral tariffs and indicated that upcoming trade communications with partners would be presented on a “take it or leave it” basis. These remarks come just as hopes had been rising over easing tensions in the US-China trade standoff.

Diverging Central Bank Outlooks Undermine USD/JPY

In addition to geopolitical concerns, monetary policy divergence is playing a key role in the USD/JPY pair’s decline. A growing belief that the BoJ may implement further monetary tightening, a significant shift from its historically ultra-loose stance, is lending persistent strength to the JPY. 

A recent Reuters poll showed a majority of economists expecting the BoJ to hold rates, but traders appear increasingly convinced that inflationary pressures may lead to a hawkish pivot later in the year.

In contrast, the US Dollar (USD) is under pressure following softer-than-expected Consumer Price Index (CPI) data for May. According to the US Bureau of Labor Statistics (BLS), the headline CPI rose to 2.4% year-over-year, slightly below expectations of 2.5%, while the core CPI, excluding food and energy, held steady at 2.8%. The tepid inflation reading has bolstered market bets that the Federal Reserve will cut interest rates in 2025.

Traders have responded decisively: the probability of a 25 basis point (bps) rate cut by September surged to nearly 70%, up from 57% before the inflation print. As a result, US Treasury yields have declined further, dragging the greenback down to its monthly lows. These dynamics heavily favor the Japanese Yen, reinforcing the downside bias in USD/JPY.

Technical Outlook: Bears in Control, Eyes on 143.00 Support

From a technical perspective, the USD/JPY pair’s break below the 144.55–144.50 horizontal support zone confirms a bearish structure. The currency pair touched a fresh weekly low during the Asian session and, despite a modest rebound, remains well below key resistance levels.

Oscillators on both the hourly and daily charts are currently aligned with bearish momentum. A decisive drop below 143.70, which marks the Asian session low, could act as a bearish trigger, opening the path for a move towards 143.00, a psychologically significant round figure. Beyond that, the next target sits at the 142.62–142.60 area, which previously served as a horizontal support zone.

Conversely, if the USD/JPY pair manages to reclaim and sustain above the 144.55 resistance area, bulls could gain enough momentum for a fresh attempt at the 145.00 mark. A further breakout above the two-week high near 145.45 would be required to shift the bias toward the upside and potentially initiate a climb toward the 146.00 level.

Focus Turns to US PPI Data

With markets already on edge from geopolitical and trade developments, attention now shifts to the upcoming release of the US Producer Price Index (PPI), scheduled for later today. This inflation measure could offer short-term directional impetus for the greenback and the broader FX landscape. 

A softer PPI print would likely reinforce existing expectations of Fed easing and weigh further on the USD/JPY pair, while a surprise uptick could provide temporary relief for the Dollar.

Conclusion: Yen Strength Likely to Persist Amid Risk Aversion and Policy Gaps

In summary, the Japanese Yen remains well-supported by a powerful combination of safe-haven flows, geopolitical risks, and policy divergence between the BoJ and Fed. The USD/JPY pair, having breached multiple support zones, is likely to remain under pressure unless there’s a clear shift in either risk sentiment or Fed rate expectations.