US policy is guiding USDJPY selling with target of 143.50

USDJPY is trading at three-week lows, reflecting stronger demand for defensive assets and a weakening US dollar. The Japanese yen is gaining support amid a global flight to safety triggered by American President Donald Trump’s aggressive tariff measures. His decision yesterday to impose duties of at least 10% on all imports has heightened fears of a global economic slowdown and triggered a sell-off in stock markets.

Investors’ reactions have been reflected in a decline in government bond yields: the yield on 10-year US Treasury securities has fallen to 4.0%, hitting its lowest level since the beginning of the year.

Additional pressure on the dollar is being exerted by lower expectations for the Federal Reserve’s (Fed) monetary policy tightness. Despite strong ADP employment data, markets are pricing in three rate cuts in 2025, starting with the June meeting. Although private sector employment exceeded expectations in March, economists remain cautious, pointing to signs of a weakening labor market. A key reference point will be Friday’s non-farm payrolls report.

The main focus of market participants is on the development of US trade policy and the possible reaction of the Federal Reserve.

At the same time, inflation data from Tokyo indicates the likelihood of further policy tightening by the Bank of Japan. Despite concerns about the slowdown of the Japanese economy amid foreign trade risks, the potential for the central bank to raise rates remains, supporting the yen.

From a technical perspective, the USDJPY pair is forming a downtrend. On the H8 timeframe, the price broke out of the descending ‘Flag’ pattern, breaking the trend support. This indicates a purposeful downward movement. However, the downside potential may be limited compared to the length of the figure’s ‘pole’ as the Relative Strength Index (RSI, 14) is approaching the oversold zone.

Signal:

The short-term outlook for the USDJPY suggests selling.

The target is at the level of 143.50.

Part of the profit should be taken near the level of 145.70.

The stop-loss could be placed at the level of 150.00.

The bearish scenario is short-term, so a trading volume should not exceed 2% of your balance.