USD/JPY plunges as trade optimism fades and BoJ looms

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USD/JPY tumbles during North American trading, hovering near the bottom of its daily range around 142.00. Persistent trade uncertainty and fading multilateralism weigh on market sentiment; BoJ meeting and US economic data eyed. Key technical resistance levels are seen around 142.37, 142.94, and 143.18. The USD/JPY pair faces heavy selling pressure, sliding to the 142.00 zone during Monday’s North American hours. Investor caution has resurfaced as broader trade optimism erodes, pushing demand toward the safe-haven Japanese Yen. Last week’s tentative rebound in risk sentiment had propelled USD/JPY back towards 144.00, but the start of this week sees renewed Yen strength ahead of key domestic and US events. Japanese markets remained closed on Monday for Showa Day, yet attention is firmly on the upcoming BoJ meeting where policymakers are expected to hold rates at 0.50%. However, Tokyo’s Consumer Price Index (CPI) excluding fresh food surged 3.4% year-over-year in March, hinting at persistent inflationary pressures that could push the BoJ closer to tightening later this year. Meanwhile, the US Dollar struggles amid stagnant trade negotiations. Despite Treasury Secretary Bessent’s comments on potential progress with Asian countries and hopes of China de-escalating, China firmly denied any ongoing talks, stressing mutual respect was essential. Retailers like Temu and Shein have already raised prices significantly for US consumers, reflecting the broader cost of persistent tariffs. Market participants are also looking ahead to a packed economic calendar, beginning with Wednesday’s first reading of Q1 US GDP, followed by Friday’s Nonfarm Payrolls report. Both releases could heavily influence the Fed’s monetary policy trajectory, with expectations rising for rate cuts if economic deterioration persists into the second half of the year. The move from multilateralism to bilateral negotiations under the Trump administration has introduced long-term structural uncertainties. While clients wonder if US trade policies could reduce global tariffs,…