Japanese Yen jumps to fresh weekly high against broadly weaker USD on positive trade headlines

• The Japanese Yen remains on the front foot against a softer USD for the third straight day.
• Bets that the BoJ will hike rates again and a weaker risk tone underpin the safe-haven JPY.
• The emergence of fresh USD selling also exerts downward pressure on the USD/JPY pair.

The Japanese Yen (JPY) adds to strong intraday gains and jumps to a fresh weekly high against a broadly weaker US Dollar (USD) heading into the European session on Thursday. Against the backdrop of expectations that the Bank of Japan (BoJ) will hike interest rates further in 2025, hopes that Japan will strike a trade deal with the US provide a goodish lift to the JPY. Apart from this, a slight deterioration in the global risk sentiment further contributes to the safe-haven JPY's relative outperformance against its American counterpart for the third straight day and drags the USD/JPY pair to levels just below mid-145.00s.

The JPY bulls, meanwhile, seem rather unaffected by the latest optimism over the de-escalation of the US-China trade war, which led investors to shift away from traditional safe-haven assets. The USD, on the other hand, continues with its struggle to attract any buyers despite easing recession fears and reduced bets for a more aggressive policy easing by the Federal Reserve (Fed). Traders now look to the US Producer Price Index (PPI) and Fed Chair Jerome Powell's appearance for a fresh impetus. Nevertheless, the fundamental backdrop supports prospects for a further depreciating move for the USD/JPY pair.

Japanese Yen strengthens further amid hopes for a US-China trade deal, BoJ rate hike bets

• Japan's Producer Price Index (PPI) released on Wednesday highlighted persistent price pressure and backs the case for further monetary policy normalization by the Bank of Japan. Moreover, BoJ Deputy Governor Shinichi Uchida reiterated that the central bank will keep raising rates if the economy and prices improve as projected.
• Japan's top trade negotiator, Ryosei Akazawa, reportedly could travel to Washington as soon as next week for a third round of trade talks with the US. The report further stated that Japan is considering a package of proposals to gain US concessions, fueling hopes for an eventual US-Japan trade deal and further boosting the JPY.
• According to the latest Reuters poll, a majority of economists expect that the BoJ could hold the key interest rate at 0.5% through September, though it could raise it to at least 0.75% by the year-end.
• Meanwhile, investors turned cautious ahead of Thursday's release of the US Producer Price Index and Federal Reserve Chair Jerome Powell's appearance later during the North American session. This further contributes to the Japanese Yen's relative outperformance against its American counterpart for the third consecutive day.
• In the meantime, a softer-than-expected US Consumer Price Index released on Tuesday reaffirmed market bets that the Fed will cut interest rates further. This, in turn, fails to assist the US Dollar to capitalize on the overnight bounce from the weekly low and further contributes to the offered tone surrounding the USD/JPY pair.
• Traders, however, have scaled back their expectations for a more aggressive policy easing by the Fed in the wake of the US-China trade optimism, which helped to ease recession fears. This might hold back the USD bears from placing fresh bets and keep a lid on any further appreciating move for the safe-haven JPY.
• Chicago Fed President Austan Goolsbee noted that some parts of the April inflation report represent the lagged nature of the data, and it will take time for current inflation trends to show up in the data. Right now is a time for the Fed to wait for more information, try to get past the noise in the data, Goolsbee added further.
• Separately, Fed Vice Chair Philip Jefferson said that the recent inflation data is consistent with further progress toward the 2% goal, but the future path remains uncertain due to trade tariffs. Jefferson also noted that the current moderately restrictive policy rate is in a good place to respond to economic developments.
• Furthermore, San Francisco Fed President Mary Daly said that solid growth, a solid labor market, and declining inflation are where we want to be. Monetary policy is well-positioned, moderately restrictive, and the Fed can respond to whatever comes into the economy, Daly added further.

USD/JPY bears might now aim to test 144.70 hurdle-turned-support, representing the 200-period SMA on H4

From a technical perspective, the USD/JPY pair struggles to capitalize on the overnight bounce beyond the 23.6% Fibonacci retracement level of the recovery from the year-to-date low set in April. Moreover, negative oscillators on hourly charts support prospects for a further intraday slide below the 146.00 mark, towards retesting the 145.60 area or the weekly low set on Wednesday. This is followed by the 38.2% Fibo. level, around the 145.35-145.30 region, below which spot prices could fall to the 145.00 psychological mark en route to the 144.70-144.65 zone. The latter represents the 200-period Simple Moving Average (SMA) resistance breakpoint on the 4-hour chart and should act as a key pivotal point. A convincing break below will suggest that the recent recovery from the year-to-date low has run out of steam and pave the way for deeper losses.

On the flip side, the 146.60 area (23.6% Fibo. level) could offer immediate resistance ahead of the 147.000 round figure. A sustained strength beyond the latter might trigger an intraday short-covering rally and lift the USD/JPY pair to the 147.70 intermediate hurdle en route to the 148.00 round figure. Any further move up beyond the 148.25-148.30 hurdle might face stiff resistance near the 148.65 area, or over a one-month peak touched on Monday, which, if cleared, should allow spot prices to reclaim the 149.00 mark.