The USD/JPY exchange rate wavered on Thursday morning as the market reacted to Donald Trump’s Liberation Day speech. It retreated to a low of 147.46, its lowest level since September 30th last year, down by almost 9% from its highest level in 2024.
Donald Trump trade war escalates
The Japanese yen rose slightly as investors reflected on Trump’s Liberation Day speech in which he unveiled tariffs on imported goods from around the world.
Trump unveiled a 10% universal tariff on all imported goods brought to the United States. At the same time, all goods from Japan will be charged a 24% tariff, higher than what most analysts were expecting.
A 24% tariff on Japanese goods will have a big impact since the country does so much business with the US. The US exported goods worth $80 billion to Japan and imported goods worth $148 billion. This gives it a trade surplus of about $68 billion.
Most of the Japanese exports to the US are cars, especially those made by Toyota, Nissan, and Honda. The others are motor vehicle parts, construction vehicles, integrated circuits, and packaged medicaments. Vehicles and parts will still be charged the 25% tariff that Trump imposed last week.
These tariffs will make Japanese vehicles so expensive in the United States. As such, many Americans may consider buying comparable vehicles made in the US, including those by Japanese companies.
Therefore, the Japanese yen rose slightly as investors moved to safe havens and as the odds of more interest rate hikes by the BoJ faded.
US NFP data ahead
The USD/JPY exchange also dropped slightly as investors waited for the upcoming US nonfarm payroll (NFP) data. Economists expect these numbers to show that the labor market remained strong in March even as business confidence dropped.
A private sector report by ADP on Wednesday showed that the US added 150k jobs in March, higher than what analysts were expecting.
The average estimate is that the US created 160k jobs in March, while the unemployment rate remained at 4.1%. Still, it is unclear whether these jobs numbers will influence the next Federal Reserve decision.
In a statement on Wednesday, Adriana Kugler noted that she would support holding interest rates for longer because of inflation concerns. She said:
“I will support maintaining the current policy rate for as long as these upside risks to inflation continue, while economic activity and employment remain stable. Going forward, I will carefully assess incoming data, the evolving outlook, and changes in the balance of risks.”
Some analysts believe that the Fed will deliver more interest rate cuts in the second half of the year to prevent the US from moving into a recession. Goldman Sachs analysts expect the bank to cut rates three times, higher than the two that the Fed has guided.
USD/JPY technical analysis
The weekly chart shows that the USD to JPY exchange rate has been strongly downward. It has moved below the 50-week moving average, and is nearing the lower side of the ascending channel.
The two lines of the MACD have moved below the zero line, while the Relative Strength Index (RSI) has dropped below 50. Therefore, the pair will likely drop further as bears target the key psychological point at 145. The pair may drop to the psychological point at 139.62 in the longer term.
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