USDJPY Slumps Into Third Month — Is a Rebound on the Horizon?

This week’s high-impact events include the ECB’s Main Refinancing Rate on Thursday, US Unemployment Claims, and key labor data from the US and Canada on Friday.

USDJPY has been trending lower since its January 10 high of 158.866, confirmed by a combination of technical reversal patterns. Momentum indicators remain bearish, though emerging positive divergence in the Momentum Oscillator hints at a possible near-term rebound.

Key resistance levels: 150.038, 151.295, 153.952, 154.794

Key support levels: 148.089, 146.855, 144.110, 139.699

On the fundamentals side, US businesses are preparing for price hikes due to new Trump tariffs, adding to inflation risks. The Fed is watching closely as slower growth and rising prices raise concerns about stagflation.

Thursday 15:15 (GMT+2) – Europe: Main Refinancing Rate (EUR)
Thursday 15:30 (GMT+2) – USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) – USA: Non-Farm Employment Change (USD)

Since reaching a high of 158.866 on January 10, USDJPY has shown a clear downward trend, marked by a series of lower highs and lower lows. The initial change in trend was indicated by the formation of a Hanging Man candlestick reversal pattern, signaling the end of the previous upward trend and the start of a new bearish phase.

This bearish direction was further confirmed by the development of a failure swing pattern, a classic technical reversal signal. Specifically, the peak at 156.743 did not exceed the previous peak, and subsequently, the price fell below the trough at 154.969, paving the way for further declines. Additionally, the formation of a “Death Cross,” where the 20-period Exponential Moving Average (EMA) crossed below the 50-period EMA, intensified bearish sentiment and provided technical confirmation of the downtrend.

Momentum indicators continue to support the bearish outlook. The Momentum Oscillator remains solidly below the critical threshold of 100, indicating sustained downward pressure, while the Relative Strength Index (RSI) remains below 50, reflecting ongoing selling dominance.

However, there is an emerging positive divergence between price action and the Momentum Oscillator, suggesting a potential weakening of bearish momentum and an increased risk of a near-term corrective rebound.

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

150.038: The initial resistance level is established at 150.038, which mirrors the weekly Pivot Point, PP, estimated using the standard methodology.

151.295: The second price target is set at 151.295, representing the peak marked March 3.

153.952: The third price objective is observed at 153.952, corresponding with the weekly resistance, R3, calculated using the standard Pivot Points methodology.

154.794: An additional upside target is projected at 154.794, mirroring the daily high from February 12.

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

148.089: The initial support level is seen at 148.089, corresponding to the daily low recorded on March 4.

146.855: The second support level is estimated at 146.855, representing the 161.8% Fibonacci Extension drawn from 148.551 to 151.295.

144.110: The third support level is identified at 144.110, reflecting the 261.8% Fibonacci Extension drawn from 148.551 to 151.295.

139.699: An additional downside target is 139.699, mirroring the 423.6% Fibonacci Extension drawn from 148.551 to 151.295.

Businesses across the US are preparing to raise prices in response to new tariffs introduced by President Trump, according to the Fed’s latest Beige Book. Companies are struggling to pass on rising input costs to consumers, but many expect tariffs will force them to hike prices anyway. Some businesses have already started raising prices preemptively.

Fed officials are watching closely as they weigh the economic risks of slower growth combined with rising prices — a scenario that could bring the economy closer to stagflation. While some firms plan to absorb costs, others — particularly in manufacturing and construction — anticipate price increases throughout 2025, adding to inflation pressures.

In conclusion, USDJPY remains in a confirmed downtrend, reinforced by technical patterns and weak momentum indicators. However, early signs of positive divergence suggest a potential near-term rebound could emerge if bearish momentum eases. Traders will be closely watching upcoming economic data and the evolving impact of Trump’s tariffs, both of which could influence price action and broader market sentiment in the weeks ahead.