The yen resumes its decline as the U.S. dollar rebounds sharply amid shifting market dynamics

Poor Trade Data Exacerbates Yen Selling Pressure

Japan's June trade data released on Thursday showed a surplus, but the scale was far below market expectations. Coupled with continued export declines, it heightened investor concerns about Japan's economic outlook. Especially the persistent weakness in exports to the US highlighted the sustained impact of US tariff policies on Japanese manufacturing.

Amid slowing global manufacturing demand and rising geopolitical risks, Japan's economic recovery momentum has significantly weakened. Although imports saw a slight increase, they did not alleviate market concerns about the health of Japan’s economy, keeping the yen under pressure.

Rising Political Uncertainty, Bank of Japan Stays Cautious

Japan's domestic political situation is also becoming a key variable for yen movements. The latest polls suggest the ruling coalition might lose its majority in the upcoming Senate elections, leading to greater fiscal policy uncertainty and diminishing yen appeal.

Under the pressure of declining inflation and real wages, the Bank of Japan is facing structural constraints on maintaining monetary easing. The market has almost entirely ruled out the possibility of a rate hike this year, and the "wait-and-see" stance of monetary policy leaves the yen lacking support, appearing more passive as the dollar strengthens.

Dollar Rebound Drives Exchange Rate Higher, Technical Indicators Show Positive Signals

The dollar-yen pair rebounded visibly this week, especially after Trump denied plans to immediately dismiss Federal Reserve Chair Powell, easing market risk aversion and weakening short-term demand for the yen. Meanwhile, investors have lowered expectations for a Fed rate cut this year, boosting confidence among dollar bulls.

Technically, after stabilizing above the 100-hour moving average, the dollar-yen pair is moving higher, with oscillators remaining in the positive zone. The current exchange rate is consolidating above 148.50, and a successful breach of the previous high of 149.20 could open the way to the 150 level.

Initial support is focused on the 148.00 level, followed by 147.70 and 147.00. If these levels are breached, mid-term technical support could be found at 146.60 and 146.00.

Tariffs and Inflation Expectations Influence Future Trends

US tariff policies are causing a ripple effect on the global economy, with officials from the New York and Dallas Feds noting that the current policy environment is gradually pressuring prices. Key data soon to be released, such as CPI, retail sales, and initial jobless claims, will directly influence the dollar's short-term trend.

Japan will release the national final CPI on Friday, which will be an important indicator for the yen's direction. Should the data show continued inflation easing, it may strengthen expectations for the Bank of Japan to maintain easing policies, further exerting downward pressure on the yen.

Traders are widely focused on whether 149.20 can form a breakout point. Once confirmed, the 150 level will become the main target of the market. Policy statements, data trends, and international political changes could all become short-term driving factors.

Policy Expectations and Technical Signals Dominate Market Rhythm

In the short term, the dollar-yen exchange rate will continue to be highly influenced by macroeconomic data and central bank commentary. If US data remains strong or if Fed officials release "hawkish" statements, the dollar may continue its upward trend, further suppressing the yen.

However, if Japan quickly reaches a policy consensus post-election or if inflation data unexpectedly rises, the yen could experience a temporary boost. Overall, amid global macroeconomic pressures and policy divergences, the medium-term direction of the dollar-yen pair remains uncertain, though short-term bulls still dominate.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.