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14 May 2025,09:31

Daily Market Analysis

Yen Slides as U.S.-China Trade Deal Boosts Risk Appetite

14 May 2025, 09:31

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 Key Takeaways:

*Risk-on rally: U.S.-China tariff truce triggers global risk appetite, reducing demand for safe-haven yen.

*BoJ remains dovish: Weak wage and spending data support continued ultra-loose policy.

Market Summary:

The Japanese yen weakened sharply as risk sentiment surged following a breakthrough in U.S.-China trade negotiations. Both nations agreed to significantly reduce tariffs for at least 90 days, easing fears of a prolonged trade war that had cast a shadow over global growth. The U.S. will lower tariffs on Chinese imports from 145% to 30%, while China will reduce duties on U.S. goods from 125% to 10%. In a further positive move, China will lift export curbs on rare earth materials crucial to high-tech manufacturing. The improved trade outlook has bolstered demand for risk assets while weighing on safe-haven currencies like the yen.

Domestic Factors – Japan:

On the domestic front, Japan’s economic fundamentals remain soft, with household spending and wage growth both disappointing. This reinforces the Bank of Japan’s dovish stance, as policymakers remain cautious about tightening until inflation sustainably reaches the 2% target — a scenario that currently seems distant..

Technical Analysis

USD/JPY, H4

USD/JPY continues to trend higher, currently testing a key resistance level at 148.10. However, MACD has shown signs of diminishing bullish momentum, while the RSI hovers around 72, indicating overbought conditions and raising the likelihood of a near-term technical correction. 

Should a pullback occur, the pair may retrace toward the short-term moving average line (yellow), where renewed buying interest could emerge. 

On the upside, a confirmed breakout above the 148.10 resistance level would suggest a continuation of the bullish trend, with the next resistance eyed at 151.15. Conversely, failure to sustain gains could see the pair retest support at 146.00, followed by 143.95.

Resistance levels: 148.10, 151.15

Support levels: 146.00, 143.95

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