Any further signs of stagflation in today’s data should be bad news for both risk assets and the dollar. With trade war uncertainty in the foreground, the USD/JPY forecast remains bearish, with 140.00 now looking an increasingly likely target for the sellers.
By: Fawad Razaqzada, Market Analyst
In what is rapidly turning into a financial drama worthy of a West End stage, global markets find themselves gripped by fresh uncertainty, courtesy of a worsening US-China trade confrontation. Unsurprisingly, the US dollar has taken a hammering. The greenback, often a barometer of market anxiety, slid overnight to its lowest level in six months. Stock index futures, meanwhile, see-sawed between gains and losses, offering little in the way of stability ahead of key US data. It appears the prospect of a prolonged economic uncertainty is forcing investors to reassess the once-dependable safety of American assets, which is why stocks, bonds and the dollar are all struggling. Investors’ focus will momentarily turn to the more traditional drivers of markets today – earnings and data as large US banks report their quarterly results, and we have the latest PPI inflation data and more importantly UoM consumer sentiment and inflation expectations surveys coming. Any further signs of stagflation in the data should be bad news for both risk assets and the dollar. Ahead of these events, the USD/JPY forecast remains bearish, with 140.00 now looking an increasingly likely target for the sellers.
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USD/JPY forecast undermined by investor aversion from US asset
One key theme that has emerged in recent weeks is that not only have US stocks remained largely out of favour (if one can ignore Wednesday’s big headline driven rally), but so too have US bonds and the dollar, all due to Trump’s trade war.
Overnight we saw a big spike in the EUR/USD, which nearly hit reached the 1.15 handle, before easing back lower, while the USD/JPY continues its slump to fall near the 142.00 level. The USD/CHF, already at its weakest level since 2015, tumbled once more to near 0.8100, while GBP/USD found support from stronger GDP data to rise back above 1.3100. Gold hit yet another record high. Stock markets are bleeding red once more.
So, you get the picture: US assets remain under pressure, as the trade dispute between the US and China continues to grow. The latest news being that China has retaliated again to hike tariffs on US goods from 84% to 125% from April 12, with China calling Trump’s policies a “joke” and indicating they’re no longer inclined to match such moves tit for tat.
While the pause of reciprocal tariffs was welcomed, let’s not forget the 10% base tariff rate hasn’t budged, and total levies on Chinese goods are now in triple digits. Hardly cause for celebration. Investors remain wary as US-China trade relations continue to dangle in limbo. Uncertainty also clouds the outlook for Washington’s dealings with other major partners, including the European Union. The global trade picture is, to put it mildly, murky.
Dollar slips as risk appetite remains weak ahead of PPI, UoM data
Risk appetite has once again turned sour, with European markets unable to find traction despite Wednesday’s big rally, when Trump announced he was pausing the higher rate tariffs for 90 days. With stocks weakening, the USD/JPY is sliding lower. While a softer US CPI inflation print crossed the wires yesterday, the greenback was already on the back foot before the data even landed. Frankly, it seems broader macro jitters are at play here, with investors not paying much attention to data. So, it remains to be seen whether today’s PPI data to the University of Michigan’s closely-watched surveys on consumer sentiment and inflation expectations will provide any meaningful support to the dollar, even if the numbers turn out to be better than expected. With trade tensions still at the forefront, the USD/JPY forecast remains tilted to the downside.
Technical USD/JPY forecast: Eyes on 140
From a technical point of view, the USD/JPY chart looks poised to slip below 142.00 handle, with price action continuing to remain heavy. Should that give way, there’s every chance the pair could push down to 140.00, with September’s low of 139.58 lurking just beneath.
This week’s earlier support at 144.50, which provided a temporary floor, may now turn into resistance on any short-term recovery attempts. Further resistance levels are seen around 146.50 and 148.15.
For any sort of bullish shift in the USD/JPY forecast, we’d need to see a convincing reversal candle on the daily chart — and, more importantly, some follow-through. That last part has been sorely lacking.
– Written by Fawad Razaqzada, Market Analyst
https://www.forex.com/en-us/news-and-analysis/usd-jpy-forecast-forex-friday-april-11-2025/
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