The Japanese yen (JPY) continued its decline during Monday’s Asian session, pressured by domestic political instability and improving global risk appetite. The currency struggled to attract safe-haven flows despite recovering on Friday from multi-month lows, as market optimism improved following former U.S. President Donald Trump’s softer tone on Chinese tariffs.
However, the USD/JPY pair found it difficult to gain momentum above the 152.00 level amid a broadly weaker U.S. dollar (USD).
Policy divergence between BoJ and Fed limits USD/JPY upside
The widening policy gap between the Bank of Japan (BoJ) and the U.S. Federal Reserve (Fed) continues to shape market dynamics. While the BoJ is expected to maintain its accommodative stance despite speculation about a rate hike later this year, the Fed is widely anticipated to cut rates twice before year-end.
These contrasting expectations have kept USD/JPY in a consolidation phase, particularly amid thin liquidity conditions due to banking holidays in both Japan and the United States.
Political turmoil weighs on the yen
Japan’s political landscape remains unsettled after the Komeito Party ended its 26-year coalition with the ruling Liberal Democratic Party (LDP), threatening Sanae Takaichi’s bid to become the country’s first female prime minister.
The political split adds another layer of uncertainty to Japan’s economic outlook, undermining investor confidence in the yen and supporting USD/JPY’s recovery above the 152.00 level.
Trump’s softer stance boosts global risk appetite
Risk sentiment received a further boost after Trump backtracked on earlier threats to impose 100% tariffs on Chinese imports. He reassured investors on Truth Social that “China’s economy will be fine” and emphasized that the United States aims to “help China, not hurt it.” His comments eased fears of a renewed trade war, driving global markets higher and reducing demand for traditional safe-haven assets such as the yen.
Technical outlook: bulls cautious below 152.20 resistance
Technically, USD/JPY shows resilience above the 23.6% Fibonacci retracement level of the latest upward wave, supported by positive signals on the daily chart.
However, Friday’s drop below the 100-hour simple moving average (SMA) suggests that bullish traders should remain cautious. Sustained movement above the 152.20 area (aligned with the 100-hour SMA) is needed to confirm a continued uptrend toward 152.70–152.75, followed by resistances at 153.00 and 153.25–153.30 — the highest levels since February.
On the downside, immediate support lies near Friday’s low of 151.15. A decisive break below the psychological 151.00 level could open the path toward the 38.2% Fibonacci retracement zone around 150.70, with further losses possibly extending toward the 150.00 area. This level coincides with both the 200-hour SMA and the 50% Fibonacci retracement, making it a key pivot point for traders.
