4 August 2025,03:27
Daily Market Analysis
4 August 2025, 03:27
Key Takeaways:
*The yen rebounded as markets priced in a potential shift away from ultra-loose monetary policy, with September emerging as a possible turning point
*A new bilateral trade deal eased short-term economic risks and bolstered the BoJ’s policy flexibility, offering near-term relief to the currency.
*Upcoming meeting minutes could confirm a hawkish tilt; markets will watch closely for signals
The Japanese yen’s recent weakness showed tentative signs of reversal as markets reassessed the Bank of Japan’s policy trajectory following its widely anticipated decision to maintain rates at 0.5%. While the central bank cited ongoing economic challenges in justifying its status quo stance, growing fundamental pressures are fueling speculation of an impending shift, with September emerging as a potential turning point for Japan’s negative interest rate era.
Trade Deal Provides Breathing Room
The currency found support from the newly minted U.S.-Japan trade agreement, which helped alleviate near-term economic uncertainty. The pact’s tariff reductions—particularly for critical Japanese exports—eased immediate growth concerns that had previously constrained the BoJ’s policy flexibility. This development, combined with Japan’s strongest wage growth in thirty years and stable inflation near the 2% target, is gradually building the case for policy normalization.
Markets Anticipate Hawkish Signals
Market attention now turns to tomorrow’s release of the BoJ meeting minutes, which promise to provide critical insight into the policy board’s evolving thinking. Traders will scrutinize the language for any hints of growing consensus around tightening, particularly regarding the interpretation of recent wage and inflation data. The yen’s ability to sustain its recovery may hinge on whether these minutes validate the market’s growing expectation of a near-term pivot.
The yen’s modest rebound reflects growing market conviction that Japan’s era of ultra-loose monetary policy may be approaching an inflection point. Should the minutes validate this view, the currency could extend its recovery, though sustained appreciation likely requires concrete evidence of inflationary persistence and economic resilience in forthcoming data. With global risk sentiment and U.S. Treasury yields remaining additional key drivers, the yen’s path forward hinges on both domestic policy developments and broader market conditions.
Technical Analysis
USDJPY, H4:
The USDJPY pair saw a sharp 2% decline in the previous session, breaking below its short-term bullish structure and raising concerns of a potential trend reversal. However, the pair managed to find support just above its long-term ascending trendline near the 147.15 level, suggesting that the broader bullish trajectory may still be intact—for now.
A decisive break below this key support could signal a shift toward a more bearish outlook. Momentum indicators are pointing to growing downside pressure: the RSI has slipped below the 50-neutral mark, while the MACD has formed a bearish crossover and is heading toward the zero line, both reflecting a notable loss in upward momentum.
Resistance Levels: 148.90, 151.15
Support Levels: 145.85, 144.10
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