USD/JPY Leans Towards Yen Strength Amid Growing Rate Cut Expectations

Fundamental Analysis

• The EU suspends retaliatory tariffs against the U.S. for six months.
• President Trump is reportedly planning a significant tariff hike on imports from India.
• U.S. stock indices rise as expectations for interest rate cuts grow.

USDJPY Technical Analysis

Analyzing the USD/JPY daily chart:
The pair formed a large bearish candlestick during the U.S. jobs report, resulting in an engulfing pattern. The Ichimoku baseline acted as a resistance level. As expectations for U.S. rate cuts increased, U.S. stock indices climbed—Dow Jones Industrial Average rose by as much as 500 points.
Previous months’ employment figures were also revised sharply downward. The 3-month average of non-farm payrolls is now at +35,000, the worst since the post-COVID era. Market participants believe that if inflation remains relatively contained, the Federal Reserve will be forced to adjust its monetary policy.
If expectations for Fed rate cuts rise further, this could lead to dollar selling, pushing USD/JPY lower. The Ichimoku Cloud around 145.38 yen is expected to serve as a key support level.

Day Trading Strategy (1-Hour Chart)

On the 1-hour chart, we’ve plotted the Fibonacci Fan. The 50% line is currently acting as a support level. The RSI is at 32, suggesting increased selling pressure, while the conversion line is capping upside movement.
A short-term rebound is possible during the day, as yesterday’s U.S. stock rally overlaps with both profit-taking and dip-buying activity.
In the Tokyo session, attention will focus on the BoJ meeting minutes, potentially increasing yen selling. In the evening London session and beyond, the spotlight may shift toward rising expectations of a U.S. rate cut. Thus, traders should monitor each market session closely, as key drivers may change over time.

Key Economic Events Today