During the Asian trading session this Wednesday, the USD/JPY exchange rate once again fell to around 142.30, approaching last week's low. This is the fifth consecutive day that the US dollar has been under pressure against the Japanese yen, reflecting investors' renewed interest in traditional safe haven assets such as the yen amid volatile trade policies.

The US decision over the weekend to temporarily exempt tariffs on some electronic products (including smartphones and computers) eased some market pressure, but then Trump threatened to impose a new round of tariffs on semiconductors and pharmaceuticals, triggering global market volatility once again.

The lack of coherence in US trade policies has led to increasing concerns in the market about global economic growth prospects, which has directly boosted the safe haven buying demand for the yen. "- Takeya Ozawa, Tokyo foreign exchange analyst

The data released on Wednesday showed that the monthly rate of core machinery orders in Japan increased by 4.3% in February, far higher than the previous value of -3.5%, setting the largest growth rate in a year. According to the sub item data, manufacturing orders increased by 3%, and non manufacturing orders surged by 11.4%, indicating that the investment willingness of enterprises is recovering.

This data strengthens the trend of Japan's economic recovery and may drive companies to raise wages, thereby supporting upward consumption and inflation.

According to market research, Japan's core CPI has remained above 2% for several consecutive months, far exceeding the target level of the Bank of Japan.

This has led to market expectations that the Bank of Japan may raise interest rates again in the first half of 2025 to control structural inflation. This expectation of interest rate hikes contrasts sharply with the prospect of the Federal Reserve shifting towards loose policies, providing strong support for the yen.

The Federal Reserve may resume interest rate cuts in June, exacerbating the downside of the US dollar and increasing the upward potential of the Japanese yen

The market currently expects the Federal Reserve to start a new round of interest rate cuts in June, with a potential annual rate cut of up to 100 basis points. This has led to a decline in the long-term yield of the US dollar and an increase in capital outflow pressure.

Investors are closely monitoring Federal Reserve Chairman Powell's speech on Wednesday for more clues on the future path of interest rates. Meanwhile, the retail sales data for April in the United States will also be released in the evening, which may become a trigger point for short-term fluctuations in the US dollar.

Trump stated last week that the US and Japan are negotiating "fair but tough" trade terms, and US Treasury Secretary Besson also stated that Japan will be a key country in tariff negotiations, which has raised optimistic expectations in the market for a future US Japan trade agreement.

If the trade tensions can be eased, it may further boost the profitability of Japanese export enterprises and strengthen the support of the yen on the economic fundamentals.

From a technical perspective, the continuous selling pressure of the US dollar against the Japanese yen above the 143 level suggests that bearish forces still dominate. The daily chart shows that the momentum indicator is in a deep negative area, indicating that the downward trend of the exchange rate is far from over.

Bottom support: The range of 142.25-142.00 is a multi month low point area. If it falls below or triggers a new round of selling, the target may look towards 141.50 and 140.80;

Upper resistance: If it rebounds to 143.60 and is still under pressure, 144.00 will become the main resistance area. If it breaks through this level, there may be short-term short covering, pushing the exchange rate towards 145.50 and 146.00.

Editor's viewpoint:

The Japanese yen currently has a triple support of "enhanced risk aversion, Japanese economic recovery, and logistic regression of interest rate spreads". From the perspective of global monetary policy, the Bank of Japan is moving towards policy normalization, while the Federal Reserve is forced to restart its easing cycle. This directional deviation is the fundamental driving factor behind the downward trend of the USD/JPY.

In the short term, if Trump continues to send tough signals on tariffs and the Federal Reserve conveys a dovish stance, the US dollar is expected to fall to around 140 against the Japanese yen.