1 September 2025,03:31
Daily Market Analysis
1 September 2025, 03:31
Key Takeaways:
*Japan’s Q2 GDP grew 1.0% annualized, led by strong capex (+7.6%) and solid domestic demand.
*External headwinds persist, with manufacturing PMI below 50 and auto sector profits plunging 30% under U.S. tariffs.
*Yen’s near-term path hinges on whether domestic strength offsets trade drag, as BoJ eyes cautious policy normalization.
Market Summary:
The Japanese yen showed tentative strength but remains caught between encouraging domestic momentum and mounting external pressures from U.S. trade policy. Q2 GDP expanded at a 1.0% annualized rate, supported by a 7.6% surge in capital expenditure and firm domestic demand. The data bolstered expectations that the Bank of Japan could continue cautiously moving toward policy normalization.
Yet, the external picture paints a more fragile outlook. The August manufacturing PMI held below 50, with new export orders contracting at the sharpest pace in over a year. Automakers were hit particularly hard, with recurring profits plunging nearly 30% in Q2 under the weight of U.S. tariffs.
This tug-of-war leaves the yen’s trajectory uncertain. Its safe-haven role provides some support in times of global stress, but the sustainability of its recovery will depend on whether domestic demand can offset the drag from an increasingly hostile external trade environment.
The yen is likely to remain range-bound, supported by domestic resilience but capped by export weakness. Unless U.S. trade measures ease or global risk aversion spikes, meaningful yen appreciation may prove elusive in the near term.
Technical Analysis
USD/JPY is struggling to gain traction, last trading near 146.95 after slipping below its 100-period moving average at 147.50. The pair has been consolidating in a tight range, but repeated failures to sustain above the 148.00 resistance highlight growing selling pressure. On the downside, immediate support is situated at 146.65, with a decisive close beneath this level likely to open the door toward the more significant 144.40 region.
Momentum indicators tilt bearish. The Relative Strength Index (RSI) is hovering near 45, reflecting weakening bullish momentum as sellers gradually take control. Meanwhile, the MACD remains in negative territory, with the histogram flattening but yet to confirm any meaningful recovery signal. Trading volumes have also stayed elevated during the latest pullback, reinforcing the cautious tone.
Overall, the technical outlook for USD/JPY is softening, with downside risks increasing below 148.00. Traders may watch for a clean break under 146.65 to confirm bearish continuation, while only a move back above 148.00 would revive upside prospects.
Resistance level:148.00, 149.50
Support level: 146.65, 144.40
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