Forex Analysis & Reviews: 02.07.2025 - USD/JPY. Analysis and...

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02.07.2025 06:51 PM

USD/JPY. Analysis and Forecast

Recent political and economic statements are having a significant impact on the USD/JPY pair's dynamics. U.S. President Donald Trump expressed frustration over the prolonged trade talks with Japan and did not rule out the possibility of imposing higher tariffs on Japanese imports—up to 30–35%, which would far exceed the previously announced 24%. Such threats could increase market uncertainty and place additional pressure on the Japanese economy.

Meanwhile, Bank of Japan Governor Kazuo Ueda emphasized that despite inflation exceeding 2%, core inflation remains below the target level overall. Any decision to raise interest rates will depend on future inflation trends, including wage growth and inflation expectations. New BoJ board member Kazuyuki Masu also called for caution, highlighting economic risks and advising against a hasty policy tightening, although a rate hike in 2025 remains possible if trade-related risks stabilize.

At the same time, Federal Reserve Chair Jerome Powell stated that without Trump's tariff policy, the Fed could have already begun monetary policy easing. He noted that any rate cut decision would depend on economic data. While markets see only a low probability of a rate cut in July, the likelihood of a cut in September exceeds 75%.

The ISM Manufacturing PMI on Tuesday showed a decline in activity for the fourth consecutive month, but the pace of contraction slowed—the index rose from 48.5 in May to 49.0 in June, beating market expectations of 48.8. This suggests a mild easing of the manufacturing sector's downturn.

Additionally, the JOLTS report from the U.S. Bureau of Labor Statistics showed that job openings rose in May to 7.769 million, up from 7.395 million in April and exceeding forecasts of 7.3 million. The increase in job openings points to sustained demand for labor, which could support the labor market.

Taken together, these factors are contributing to the weakening of the U.S. dollar to levels last seen in 2022, which is likely to limit the upside potential for the USD/JPY pair and maintain current technical levels.

Today, for better trading opportunities, it is worth paying attention to the release of the ADP private sector employment report. On Thursday, the key Nonfarm Payrolls (NFP) report will determine the dollar's direction, including for the USD/JPY pair. These data will be critical in assessing the state of the labor market and the Fed's future actions.

From a technical perspective, oscillators on the daily chart are mixed, indicating market uncertainty over the longer term.

Nonetheless, trading is possible intraday. Resistance is marked by the 200-period simple moving average (SMA) on the 4-hour chart, above which the pair will face a barrier at 144.50. A breakout above this level would open the way for a move toward the psychological level of 145.00.

On the other hand, the pair will find support at 143.75, followed by 143.30. The key level is the round number of 143.00—if it fails to hold, the pair could continue its decline toward the monthly low, increasing the likelihood of a bearish scenario.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.