USDJPY Bearish Slide Deepens Amid Tariff Turmoil

The USDJPY pair remains under pressure as market participants digest key economic and geopolitical developments. With the U.S. dollar showing signs of fatigue amid uncertainty over tariff policies, investors are closely monitoring upcoming data, including U.S. retail sales, for further directional cues. Meanwhile, the yen has weakened against the dollar due to widening rate differentials and concerns over potential U.S. tariffs on Japanese exports.

Technically, the USDJPY has entered a sustained downtrend since peaking in early January, with key resistance and support levels now shaping short-term trading strategies. Momentum indicators confirm bearish sentiment, though any shifts in fundamental drivers—such as U.S. inflation trends, Federal Reserve policy expectations, or intervention risks from Japan—could alter the currency pair’s trajectory.

Friday 15:30 (GMT+2) – USA: Retail Sales m/m (USD)

Since January 10, the USDJPY has steadily declined from its peak of 158.866, shedding over 5% of its value amid a combination of bearish fundamental and technical signals.

This initial shift was triggered by a series of Japanese candlestick reversal patterns, including a Hammer, Spinning Top, and Long-legged Doji, setting the stage for the decline. The decline was reinforced by the emergence of a failure swing reversal pattern, indicating growing selling interest. Notably, the peak at 156.743 held below the previous peak, and prices subsequently broke below the trough at 154.794, signaling the start of a downward trajectory. The downtrend gained further momentum as prices moved below both the 20-period and 50-period Exponential Moving Averages (EMAs), which formed a “Death Cross” double crossover reversal.

Momentum indicators continue to support this bearish outlook. The Momentum Oscillator remains below the neutral 100 level, indicating sustained downward pressure, while the Relative Strength Index (RSI) stays below its 50 midpoint, confirming persistent selling activity.

Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:

154.794: The initial resistance level is set at 154.794, which mirrors the daily high reached on February 12.

156.743: The second price target is identified at 156.743, representing the peak from January 23.

158.866: The third price objective is determined at 158.866, which corresponds with a daily high marked January 10.

159.456: An additional price target has been established at 159.456, mirroring the weekly resistance, R3, calculated using the standard methodology.

Should the sellers maintain market control, traders may consider the four potential support levels listed below:

150.922: The initial support level is seen at 150.922, corresponding to the swing low formed on February 7.

148.637: The second support level is estimated at 148.637, representing the low point marked on December 3.

147.775: The third support level is identified at 147.775, reflecting the weekly support, S2, calculated using the standard Pivot Points methodology.

144.657: An additional downside target is 144.657, mirroring the 261.8% Fibonacci Extension drawn from 150.922 to 154.794.

The U.S. dollar is showing signs of fatigue as investors reassess the impact of President Trump’s tariff threats, which are increasingly viewed as a negotiating tactic rather than a precursor to broad trade restrictions. The Dollar Index has fallen to a two-month low, with the greenback weakening against all G-10 currencies, particularly commodity-linked ones like the Canadian and Australian dollars.

Market sentiment is shifting as delays in tariff implementation bolster global equities and emerging-market assets. Traders are scaling back bullish dollar bets, with forex options signaling continued downside pressure. While some investors still expect the dollar to recover on U.S. economic strength, skepticism is growing, with analysts warning that prolonged uncertainty could push the currency into a broader downtrend.

On the other hand, the yen extended its decline, hitting its weakest level in a week.

A stronger-than-expected U.S. inflation report further reinforced the greenback, with traders pushing back expectations for a Fed rate cut, making the yen less attractive. Japan has requested an exemption from Trump’s proposed 25% steel and aluminum tariffs, but uncertainty over trade policy continues to weigh on sentiment.

Despite its recent slide, the yen remains the best-performing G-10 currency against the dollar this year, with markets still anticipating a potential Bank of Japan rate hike. However, further weakness may prompt intervention from Japanese authorities if volatility escalates.

The USDJPY remains in a bearish phase, driven by technical signals and fundamental uncertainties surrounding U.S. trade policy and monetary expectations. With the dollar showing signs of fatigue and the yen facing pressure from rate differentials and tariff risks, the currency pair is at a critical juncture.

Key support and resistance levels will dictate near-term price action, while upcoming U.S. retail sales data could provide additional volatility. Traders should closely monitor shifts in Fed rate expectations, potential Japanese intervention, and evolving trade developments for further direction.