Trade tensions and dollar weakness push USDJPY toward 142.740 level

The USDJPY currency pair rallied on Wednesday following Trump's decision to pause some new tariffs. However, on Thursday morning, April 10, the pair resumed its decline after opening at the 147.640 level.

Investors continue to weigh the impact of US trade policy on economic prospects for both America and Japan. While the 90-day tariff reprieve provided temporary market relief, fundamental risks remain significant—particularly regarding how prolonged trade conflicts might affect the dollar's status as the global reserve currency.

Analysts at Deutsche Bank and PIMCO are now warning about potential crisis of confidence in the US dollar. While the greenback has traditionally been considered a safe haven, current market behavior suggests this dynamic may be shifting. While investors are fleeing US assets, the dollar is weakening, which is the exact opposite of what usually happens during periods of market uncertainty.

Meanwhile, the Japanese yen is strengthening its role as a safe-haven currency, which is clear from the USDJPY pair's recent performance amid heightened trade tensions. Despite a temporary stabilization following the tariff pause announcement, the pair soon resumed its decline. Another factor weighing on the dollar is investors' concerns over a potential acceleration in US inflation due to rising import prices.

The USDJPY's current price action comes amid record-high yields on Japanese Government Bonds (JGBs). This creates additional incentives for yen inflows, further pressuring the US dollar. While the Bank of Japan maintains its easy monetary policy—which would normally cap yen strength—market factors are currently outweighing this effect.

This Thursday, the market awaits US inflation data and weekly jobless claims numbers. Hotter-than-expected inflation figures or rising unemployment claims could weigh on the dollar amid growing economic slowdown concerns. Next week, all eyes will be on US retail sales figures, which are a crucial gauge of consumer activity. Robust data could bolster the greenback by signaling economic resilience, while disappointing numbers might trigger a sell-off.

From a technical point of view, the USDJPY chart is showing a bearish trend on April 10. The MACD indicator is holding in negative territory, confirming the bearish momentum.

Current recommendation: 

Sell at the current price. Take profit – 142.740. Stop loss – 149.121.