USD/JPY Holds 143.40 as Fed Dovish Pivot Meets Yen Strength — Breakout or Breakdown?

USD/JPY Anchored Near 143.40 as Traders Weigh Fed Dovishness vs BoJ Hawkish Shift

Tight Range Reflects Battle Between Safe-Haven Demand and Macro Divergence

The USD/JPY pair has remained confined near 143.40, attempting to rebound from the 142.55 support zone while failing to decisively push beyond 144.00 resistance. Traders are caught between two macro narratives: rising safe-haven flows into the yen amid U.S. trade tensions and Russia-Ukraine risks, and persistent Fed dovishness pressuring the dollar. Meanwhile, the Bank of Japan's tone has shifted notably hawkish, suggesting a potential re-acceleration in tightening policy if wage and economic conditions allow.

BoJ Governor Kazuo Ueda's comments on June 3 confirmed the central bank's readiness to raise rates if economic activity revives, reinforcing yen strength. His stance comes as safe-haven demand increases due to Trump’s promise to double tariffs on steel and aluminum imports, which threatens to escalate trade friction across key U.S. partners like Canada and the EU. These developments have driven capital into the yen, capping the dollar’s recovery despite mild rebounds in the DXY index.

USD/JPY Technical Levels: 142.55 Support, 144.33 Resistance Hold the Range

On the 4-hour chart, USD/JPY is consolidating with a slight bearish bias. The 142.55 level, tested multiple times since April, remains pivotal support. A close below it would confirm a bearish continuation toward 140.01, a key long-term support tested thrice in the last 12 months. This zone has been a fortress, holding declines since September 2023.

MACD momentum is flat but bearish bias is weakening, with signs of a potential crossover. RSI sits just under 50, reinforcing the neutral-to-bearish tilt. Traders eye a breakout above 143.78, near the 50-period EMA. A clean close above this could push the pair toward 144.33, aligned with the 50% Fibonacci retracement, and then 144.79, the 61.8% retracement level. But repeated failure to close above 145.00, seen last week, continues to pressure sentiment.

Fundamentals Cap Dollar Rebound: Weak ISM PMI, Soft JOLTS Data Keep USD in Check

U.S. data continues to underwhelm. The May ISM Manufacturing PMI printed 48.5, below consensus estimates of 49.3, signaling contraction for a third consecutive month. In parallel, JOLTS job openings showed signs of cooling, further weakening confidence in the labor market. These data points added weight to dovish Fed expectations, with futures now pricing in a 70% probability of two rate cuts before year-end.

Fed officials such as Austan Goolsbee have indicated policy easing could arrive as soon as trade disruptions ease. With inflation contained and growth fragile, the market bias remains tilted toward dollar weakness, limiting the upside for USD/JPY.

Carry Trade Dynamics Still Support USD/JPY Resilience—but Only Above 140.00

Despite the macro headwinds, carry traders remain anchored to USD/JPY due to the interest rate differential. Since early 2021, the pair has climbed over 40%, driven by ultra-loose BoJ policy and hawkish Fed cycles. But that divergence is now fading. If BoJ rate hikes accelerate while the Fed begins cutting, the carry premium will compress, threatening one of the major pillars holding the pair above 140.00.

The 140.00–142.00 range has held through every major dip since late 2022, including the intense April 2025 selloff. A breakdown below this region would trigger stop-losses for leveraged carry positions, possibly accelerating declines.

USD/JPY Outlook: Bullish Momentum Weakening, Bearish Risks Rising

While USD/JPY holds a short-term rebound structure with higher lows from April to June, technicals suggest waning bullish momentum. Unless 144.00–144.33 breaks with volume and closes, upside conviction remains low. With macro headwinds building, geopolitical risks rising, and BoJ tone turning hawkish, the risk/reward skews to the downside.

Verdict: Hold, Bearish Tilt — USD/JPY needs to clear 144.33 and reclaim 145.00 to resume bullish momentum. Until then, risk is for a breakdown toward 142.00, then 140.00, especially if upcoming U.S. data disappoints or if BoJ surprises with earlier-than-expected tightening.

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