Japanese Yen remains on defensive against mildly positive USD, despite US-China trade uncertainty

• The Japanese yen decreases because the hopes of an American trade agreement undergo safe security assets.
• The expectations that the BOJ can pause other rate increases also act as a headwind for the JPY.
• Divergent political expectations nourished in BOJ should continue to benefit from low -yield JPY.

The Japanese yen (JPY) to research between lukewarm gains / minor losses at the start of a new week and remains close to almost two weeks against its American counterpart last Friday. Despite the mixed signals of the United States and China, investors remain optimistic about the de-escalation of trade tensions between the two world's largest economies. This, in turn, is seen undermining the safety jpy, which, with a slight increase in the US dollar (USD), helps the USD / JPY pair to return to the 144.00 district at the start of the European session.

Meanwhile, investors now seem to have taken up their expectations for an increase in immediate interest rates of the Banque du Japan (BOJ) due to the economic risks of American prices. However, signs of widening inflation in Japan keep the door open for more BOJ level increases in 2025, which marks a great divergence compared to betting for the softening of more aggressive policy by the Federal Reserve (Fed). This could prevent USD bulls from placing aggressive bets and limiting losses for the JPY at a lower cost, guaranteeing caution before positioning for any other USD / JPY appreciation.

The Japanese yen is undermined by a combination of factors; The downward potential seems limited

• US Treasury Secretary Scott Bessent said on Sunday that he didn’t know if US President Donald Trump spoke to Chinese President Xi Jinping. Bessent added that he had interactions with his Chinese counterparts last week, but did not mention the prices.
• In addition, China has denied several times that commercial negotiations occur with the United States. This templers hopes for a de-escalation of trade tensions between the two largest economies in the world and could underlie the Japanese yen in holly safe at the start of a new week.
• The vice-minister of the vice-finance of international affairs and the high-level diplomat, Atsushi Mimura, denied a media report according to which Bessent had declared to the Minister of Japanese finance Katsunobu Kato Kato in a meeting last week that a weak US dollar and a solid JPY are desirable.
• Meanwhile, Bessent said in an X post on Saturday that he had had very constructive interviews with his Japanese counterpart, fueling the hopes of a possible American-Japan trade agreement. This turns out to be another factor acting like a rear wind for the JPY during the Asian session.
• Despite high inflation, the Bank of Japan should move with caution and arouse new rate increases in concerns that new American rates could shave 0.5% of Japan GDP. The Boj should leave the prices unchanged at its political meeting this week.
• However, inflation remains greater than the target of 2% for the third consecutive year and large companies continue to offer bumper salary increases this year. This gives the margin of the Boj to tighten its monetary policy in 2025, which supports the prospects for another appreciation of the JPY.
• On the other hand, traders bet that the federal reserve will resume its rate reduction cycle in June and will reduce loan costs from a complete percentage point by the end of this year. This manages to help the US dollar to rely on last week's rebound from a multi -year hollow.
• Meanwhile, North Korea confirmed on Monday that it had sent troops to fight against Russia in war with Ukraine. In addition, US Secretary of State Marco Rubio said the United States could abandon his attempts to negotiate an agreement if Russia and Ukraine are not progressing.
• This maintains the geopolitical risk premium in the game, which, with the divergent political expectations nourished in BOJ, suggests that the path of the slightest resistance for the low -yield JPY is upwards.

The USD / JPY bulls must wait to go beyond 144.35 before positioning for other gains

A sustained step beyond the simple mobile average at 100 periods (SMA) over 4 hours chart will be considered a key trigger for the USD / JPY bulls in the context of last week's escape above the Fibonacci trace level of 23.6% of the fall in March-April. The oscillators on the 4 -hour graph show a positive traction, referring to an intraday element, but daily indicators have not yet confirmed a positive bias and caution is still justified. Consequently, any subsequent resistance beyond the brand 144.00 could cope with rigid resistance near the region 144.35, or the FIBO of 38.2%. level. However, some follow -up purchases should pave the way for a significant short -term advantage.

On the other hand, zone 143.25, followed closely by the round figure of 143.00, now seems to protect the immediate disadvantage. Any other slide could continue to attract certain drop buyers near the 142.60 or FIBO area of ​​23.6%. This should help limit the drawback near the support area 142.25. However, a convincing break below the latter, leading to a later rupture through the round figure of 142.00, could make USD / JPY pair Vulnerable to weaken more towards the middle of 141.00 on the way to the region 141.10-141.00. The descending trajectory could extend more to intermediate support near the 140.50 zone and expose the low multi -house levels – below the psychological brand 140.00 affected last week.