USD/JPY surges as risk-on sentiment weighs on safe-haven Yen

The USD/JPY pair is trading near 148.00, up approximately 2% on the day, as risk-on sentiment dominates global markets following a significant breakthrough in US-China trade relations. Over the weekend, the two economic giants agreed to a 90-day tariff reduction, with the US cutting its tariffs on Chinese imports to 30% (from 145%) and China reducing its duties to 10% (from 125%). This temporary de-escalation has sparked a rally in risky assets, weighing on traditional safe-haven currencies like the Japanese yen.

The US Dollar has surged in response to the trade truce, supported by a sharp rise in US bond yields. The benchmark 10-year US Treasury yield has climbed to 4.45%, reflecting reduced expectations for near-term Federal Reserve rate cuts. Meanwhile, the US Dollar Index (DXY) has gained over 1.25% to 101.74, its highest level in a month, further pressuring the yen. Fed Governor Adriana Kugler noted that while the tariff reduction is a positive development, the long-term impact on global supply chains remains uncertain, complicating the Fed's assessment of the US economy's underlying strength.

On the Japanese side, recent data shows that Japan's March current account surplus came in at JPY 2.723 trillion, beating the expected JPY 2.465 trillion. However, Japanese investors were net sellers of foreign bonds in March, reducing exposure to overseas assets amid volatile global markets. This trend highlights the cautious sentiment among Japanese institutional investors despite the positive trade developments.

Technical Analysis

The USD/JPY is flashing a bullish signal, trading around 148.00 with roughly 2% gains today, near the top of its daily range (145.69 – 148.65). The Relative Strength Index (RSI) sits in the 60s, suggesting neutral conditions, while the Moving Average Convergence Divergence (MACD) signals buy momentum. Further confirming neutral momentum, the Bull Bear Power trades around 5, the Awesome Oscillator also signals neutral conditions, and the Ultimate Oscillator (7, 14, 28) resides in the 60s.

The 20-day Simple Moving Average (SMA) supports the buy signal, while the 100-day and 200-day SMAs suggest selling, reflecting a mixed long-term outlook. Both the 10-day Exponential Moving Average (EMA) and 10-day SMA hover in the 140s, aligning with the overall bullish sentiment.

Key support levels are found around 146.45, 146.29, and 145.69, while resistance lies around 149.56, 149.62, and 150.37. A break above 149.60 could signal further upside, while a decline below 146.30 may open the door for a deeper correction.

Daily Chart