Written by: Rania Gule, Senior Market Analyst at XS.com – MENA

(MENAFN- Your Mind Media ) Amid the accelerating volatility sweeping global markets, the USD/JPY pair continues to stand out as one of the key indicators reflecting the balance of both economic and psychological forces in the financial landscape. In recent days, the U.S. dollar has started to lose some of the momentum it had gained following the upbeat non-farm payrolls (NFP) report, as optimism surrounding those figures fades and markets shift into a reassessment phase, particularly with fresh political and economic data looming on the horizon.
While last Frid’y’s U.S. job report showed a positive surprise, adding 139,000 jobs versus the 130,000 expected, the market reaction was noticeably subdued compared to similar reports in the past. In my view, this muted response is because, although the numbers were positive, they were not strong enough to fundamentally shift the cautious outlook toward the U.S. economy. This comes especially as doubts persist over political and trade stability, reducing the probability of a rate hike by the Federal Reserve in the near term.
It seems the markets are no longer reacting to isolated figures in a vacuum, but instead are interpreting them through a broader geopolitical lens. This shift in investor behaviour helps explain the waning dollar momentum, despite decent macro data. Investors have grown more selective and risk-averse, especially as global trade tensions remain fragile, even if signs of a potential breakthrough have recently emerged.
In this context, I believe that all eyes are now firmly on the ongoing trade negotiations between the U.S. and China. These talks follow a series of stalled meetings. Still, this round appears to be receiving a more optimistic reception, especially after President Donald Trump tweeted his confidence in a positive outcome. This change in tone from the U.S. leadership suggests a desire to de-escalate tensions, likely driven by both domestic and economic pressures. Any tangible progress here could have an immediate impact on market sentiment, particularly on safe-haven currencies like the Japanese yen.
Meanwhile, the yen, which traditionally serves as a haven, has found additional support from falling U.S. Treasury yields and the dollar’s broader decline on Monday. Market sentiment has tilted toward caution, reinforcing the yen's position, at least temporarily. The USD/JPY pair retreated toward 144.86, which, from my perspective, signals that investors are beginning to reassess their long-dollar positions and prefer to wait for clarity from the ongoing negotiations.
Japan also plays a critical role in this evolving picture. On Friday, it was reported that Tokyo had made some progress in its bilateral trade discussions with Washington. This adds another layer of support for the yen, as these developments enhance Jap’n’s bargaining power and may provide a psychological edge for the currency, especially if the U.S.-China talks slow down or yield limited results.
Hence, I see markets currently entering a "wait-and-see" mode, which is reflected in the USD/JPY pair's movements. The pair seems caught between conflicting forces: on one hand, mixed U.S. economic data, and on the other, trade negotiations full of promise but also riddled with uncertainty. This delicate balance means that any surpr—ses—either in monetary policy or trade develo—ments—could quickly trigger sharp market moves.
Looking ahead, a major focus for the week will be W’dnesday’s U.S. Consumer Price Index (CPI) report. These inflation figures will shed more light on the impact of trade tensions on price levels and play a pivotal role in shaping expectations for the Feder’l Reserve’s policy decisions over the coming months. A weaker-than-expected print could revive speculation of future rate cuts, weighing further on the dollar.
Therefore, I expect USD/JPY to remain subject to sharp fluctuations in the short term. However, the overall bias appears to lean toward a gradual decline, as long as cautious sentiment dominates and no breakthroughs are seen in trade talks. Should we witness a clear break below the 144.00 support level, this could open the path toward 143.20 or even lower, particularly if U.S. yields retreat again.
On the other hand, any real and sustained progress in trade negotiations, or a stronger-than-expected U.S. inflation report, could give the dollar a fresh boost, potentially pushing the pair toward 145.50 or even 146.00. Still, given the prevailing market mood, the scenario favouring yen resilience and dollar softness remains the more plaus—ble outcome—unless a major shift occurs in the coming hours or days.
Technical Analysis of ( USDJPY ) Prices:
The 4-hour (H4) chart reveals that the USD/JPY pair is confronting a technically critical zone around the 144.94 level, as it currently trades above the 20-day Simple Moving Average (SMA) positioned at 144.38. This setup suggests short-term bullish momentum, yet it's fragile and highly sensitive to ongoing geopolitical developments. The mentioned moving average is currently acting as a firm support line, while the psychological level of 144.00 represents a pivotal threshold that must be closely watched. A decisive break below this level could significantly alter the technical outlook.

MENAFN11062025006667014463ID1109660097