18 June 2025,06:07
Daily Market Analysis
18 June 2025, 06:07
*Yen struggles despite rising war risks, weighed down by BoJ’s dovish stance.
*BoJ delays and weak data deepen policy divergence with the Fed.
*Trade tensions with the U.S. and poor exports cloud Japan’s outlook.
The Japanese Yen has continued to trade on the back foot this week, despite rising geopolitical tensions in the Middle East driven by the intensifying conflict between Israel and Iran. Typically seen as a safe-haven asset during periods of heightened global uncertainty, the Yen’s lackluster performance suggests that market focus has shifted away from traditional risk aversion cues and toward broader macroeconomic and domestic factors.
A major factor tempering the Yen’s performance is the Bank of Japan’s persistently dovish policy stance. Following its decision to keep rates steady at 0.5% and delay any meaningful balance sheet reduction until 2026, the BoJ has reinforced market expectations that monetary policy will remain accommodative for an extended period. Governor Ueda’s recent warnings about rising global trade risks and instability in the Middle East only deepen the sense that the central bank is unlikely to tighten policy in the near term. This has widened yield differentials—particularly versus the U.S.—and limited the Yen’s upside.
Adding to the pressure are renewed concerns over Japan’s trade outlook. Talks with the U.S. at the G7 summit ended without resolution, and with a July 9 deadline approaching for potential reciprocal tariffs, sentiment around Japan’s export-reliant economy has turned cautious. The situation is further complicated by weak domestic indicators, including a sharp decline in machinery orders and deteriorating business sentiment, which underscore the fragility of Japan’s post-COVID recovery and support the BoJ’s wait-and-see approach.
Looking ahead, while the Yen could still benefit from delayed safe-haven demand if the Israel-Iran conflict worsens, its ability to rally meaningfully may remain constrained unless the BoJ signals a shift in tone or trade risks ease. Until then, the JPY appears stuck between geopolitical support and policy headwinds—likely trading in a narrow range unless external shocks alter the current market equilibrium.
USDJPY, H4:
USD/JPY remains buoyant above the 145.00 level following a clean breakout from its descending trendline, but recent price action suggests growing hesitation near the 146.20 resistance zone.The pair’s inability to sustain upward momentum following its breakout from a descending trendline suggests that bullish conviction may be waning, leaving the structure vulnerable to consolidation or a potential pullback.
Momentum indicators reflect this fragile structure. The Relative Strength Index (RSI) is hovering around 58, staying in bullish territory but failing to confirm strong upside conviction. Meanwhile, the MACD is showing early signs of fatigue, with the histogram shrinking and the MACD line flattening near the signal line—hinting at a possible loss of bullish traction.
Unless bulls regain control and force a clean break above the 146.20 threshold, USD/JPY risks drifting lower toward the 144.30 support area, with deeper losses potentially eyeing the 142.65 level. Price behavior around current range highs will be critical in determining whether the pair is merely pausing—or priming for a broader correction.
Resistance Levels: 145.10, 146.20
Support Levels: 144.30, 142.65
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