USD/JPY Price Analysis: Yen Climbs on US-Japan Trade Optimism

• The USD/JPY price analysis indicates optimism following reports of a trade deal between the US and Japan.

• Japan will invest $550 billion in the US.

• Japan’s PM Shigeru Ishiba might resign next month.

The USD/JPY price analysis indicates optimism following reports of a trade deal between the US and Japan, which has boosted the yen. However, the currency gave up some of its gains after reports that Japan’s Prime Minister is planning to step down next month.

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The yen soared after Trump announced a trade deal with Japan that sets its reciprocal tariff at 15%. At the same time, Japan will invest $550 billion in the US. The news came as a surprise to most, as talks between Japan and the US had been ongoing for some time. 

Initially, market participants were concerned after Trump threatened a 25% tariff on Japan. The worries grew after a shift in the country’s political landscape. The ruling party lost its majority in the upper house, causing political uncertainty.

However, there was downward pressure after news that Japan’s PM Shigeru Ishiba will resign next month. The elections on Sunday put the leader in a difficult position after he lost majority in the upper house. His resignation would create more uncertainty about the next leader. 

USD/JPY key events today

Neither the US nor Japan will release key reports today. Therefore, traders will continue to digest the US-Japan trade deal.

USD/JPY technical price analysis: Bearish bias strengthens with new lows

On the technical side, the USD/JPY price has dropped further below the 30-SMA, confirming the recent reversal. The price trades well below the SMA, showing bears have a strong lead. At the same time, the RSI is under 50, supporting solid bearish momentum. 

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Bears have maintained the lead since the price broke below the SMA and the 148.02 key support level. At the same time, the price has made a lower high and low, a sign that the new downtrend is developing. The next target for bears is at the 146.01 support level. A break below this level will strengthen the bearish bias. 

Moreover, it will allow USD/JPY to retest the 144.00 support level. However, the decline might pause briefly at the 146.01 support level, allowing the SMA to catch up. The bearish bias will remain intact as long as the price stays below the SMA.

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