- USD/JPY tracking haven assets, not yields or risk assets
- US trade headlines and Treasury auctions key this week
- Selling rallies preferred with 141.65 key support
The Japanese yen continues to behave like a safe haven rather than a play on interest rate differentials between the United States and Japan. The central bank speakers’ calendar is bursting at the seams, but it’s questionable how much influence it will have on USD/JPY given heightened levels of uncertainty.
With no top-tier hard economic data released in the United States, and the calendar in Japan already looking dated, emphasis should be on headlines relating to US trade policy and US Treasury auction results in the week ahead.
Old Relationships Break Down
USD/JPY is no longer behaving as a proxy for Federal Reserve expectations or yield differentials between the United States and Japan, as seen in the negligible relationship with Fed rate cut pricing in 2025 (black) and US-Japan 2-year and 10-year yield spreads (purple and green respectively) over the past fortnight.
Nor is it moving in line with riskier asset classes such as Nasdaq 100 futures (red) or S&P 500 VIX futures (grey) over the same period. Instead, the yen has been strongly correlated with the Swiss franc (blue) and spot gold (yellow) against the US dollar, indicating it’s being treated as a haven.
Source: TradingView
What Traders Should Watch?
Unless that changes dramatically this week, headlines relating to US trade policy are likely to remain influential on USD/JPY movements. Perceived good news may help to strengthen the dollar, with bad news doing the opposite.
While usually a secondary consideration for USD/JPY traders, results of new 2-year, 5-year, and 7-year Treasury auctions will offer clues on foreign demand for US debt, making them far more influential given a clear shift away from US dollar assets since Liberation Day in early April. The indirect bidder detail will be the key area to watch.
Source: Refinitiv
Data, Speeches Screen as Secondary Considerations
Outside of those events, central bank commentary and economic data will be a distant secondary consideration this week. The US will host a series of major monetary and fiscal events, meaning the calendar is extremely full. But will we learn anything we don’t already know or presume? Unless uncertainty dissipates sharply, the honest answer is most likely no.
Source: Refinitiv
Similarly, the US and Japanese data calendars contain releases that would normally be major risk events, but the macro environment has changed so dramatically in recent weeks that much of the information now comes across as stale and likely irrelevant. Any reaction to the flash PMIs will likely be faded, especially given concerns that what’s being reported may not accurately reflect what’s happening on the ground. Markets now want to see hard economic data, and outside of durable goods orders, the few releases that fit the bill this week are only secondary in nature.
Services producer prices and Tokyo inflation may provide clues on upstream price pressures in Japan, making them noteworthy if the international environment were to brighten substantially. That appears very unlikely near term.
Source: TradingView
Selling USD/JPY Rallies Preferred
Source: TradingView
Selling rallies in USD/JPY remains the preferred way to play it this week, with price and momentum signals remaining firmly bearish. Support at 141.65 held firm late last week, making that the first downside level of note. If that were to be broken cleanly, 139.60 would come into play. On the topside, resistance is found at 144.00, although last week’s price action suggests sellers were active on pushes above 143.00.
Traders should also pay attention to any interaction with the downtrend support established in February. The price has bounced from this level on multiple occasions, contributing to what’s ended up being a grinding move lower rather than a major one-off adjustment. If the trendline were to be broken, it could increase the risk of an acceleration in the bearish unwind.