The USDJPY exchange rate is an interesting one to follow in the current climate with safe haven demand, tariff turmoil, and the recent bond market issues.
The price of USDJPY has hit resistance at the 146 level and now looks to support at the 142.40 level.
Fed Chair Jerome Powell will talk about monetary policy ahead of Tuesday’s session with a 1am HKT speech. That could create movement in FX rates before stock markets open.
Investors will then look at a speech from Bank of Japan Governor Ueda at 15.50pm HKT.
Powell has already released an outlook for monetary policy in 2025.
“It remains critical that the Fed understand the policies and practices of other governments and central banks, and their implications for the US economy and financial markets. Exchange rate policy, of course, is now firmly in the hands of the US Treasury,” Powell said.
“Understanding global trade and capital movements has only grown in importance since 1950, as we saw during the pandemic. The IF division helps produce the data on international capital flows, and has spent decades researching the effects of these flows and international trade on US and foreign economies. Understanding this complex and interconnected web is essential for us to anticipate the path of employment and inflation”, he added.
Central banks are in “watch and see” mode as the tariff situation remains chaotic and fluid. There is still a chance for higher inflation in the months ahead and growth is expected to be subdued in the year ahead.
The Japanese yen could be expected to fall with the current weak demand in bond markets and tariffs, but investors are also looking for safe havens away from the Eurozone as conflict heightens.
That makes it an interesting pair to watch as economic releases and central bank talk can be countered with safe-haven flows. The Bank of Japan also received requests from financial institutions to slightly slow the pace of tapering in its bond purchases from fiscal year 2026 onward, despite the recent issues in the bond market.
