USD/JPY extends gains as market monitors US tariff policy

The USD/JPY pair climbed to 147.42 on Monday. Early in the session, the yen staged a partial recovery from last week’s losses amid heightened global trade risks, but the rebound proved short-lived as the currency resumed its downward trajectory.

Former US President Donald Trump announced plans to impose 30% tariffs on imports from the EU and Mexico, effective from 1 August. In response, officials from both the EU and Mexico signalled their willingness to engage in further negotiations with the US administration, hoping to secure more favourable terms.

Meanwhile, the EU is broadening consultations with other nations affected by the tariffs, including Canada and Japan, potentially paving the way for a coordinated response.

Domestic data from Japan revealed that core machinery orders fell by 0.6% in May (month-on-month), reaching ¥913.5 billion. While still negative, the figure outperformed expectations of a 1.5% decline and marked a notable improvement over April’s steep 9.1% drop.

With a busy week ahead, further volatility in USD/JPY is anticipated.

Technical analysis: USD/JPY

Four-hour chart

On the H4 chart, USD/JPY continues to advance within the third wave of its corrective movement towards 148.65. Today, we expect the pair to test this level before a potential pullback to 145.65 (testing from above). Subsequently, another upward wave could materialise, targeting at least 150.66. This scenario is supported by the MACD indicator, where the signal line remains above zero and points firmly upward.

One-hour chart

The H1 chart shows the pair consolidating around 147.17, with the current structure suggesting further upside towards 148.65. Today, we anticipate an initial push to 148.18, followed by a retracement to 147.17, before another rise towards 148.65. The Stochastic oscillator corroborates this outlook, with its signal line positioned at 50 and trending upward.

Conclusion

The USD/JPY pair remains on an upward trajectory, supported by trade policy uncertainties and technical bullish signals. Traders should prepare for potential swings as the market digests incoming economic and political developments.