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Japanese Yen Gains Strength on BoJ Rate Hike Speculations and International Safe-Haven Demand

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  • May 22, 2025
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Japanese Yen (JPY) has gained significantly, touching a two-week high relative to the US Dollar (USD), as a result of a mix of bullish domestic and international drivers. Optimistic Japanese Machinery Orders data has raised hopes of Japan’s economic turnaround and speculation regarding additional rate hikes by the Bank of Japan. At the same time, fresh safe-haven demand amid rising geopolitical tensions and fear of the US fiscal prospects has contributed to the Yen’s popularity. Poorer-than-expected US economic reports, hopes of Federal Reserve rate cuts, and political uncertainty over President Trump’s tax bill have also pushed down the USD, further supporting the bearish leaning of the USD/JPY pair. KEY LOOKOUTS •  Monitor any new comments or policy changes from the Bank of Japan, particularly on interest rate rises, as ongoing monetary tightening may foster further JPY appreciation. • The main indicators like Weekly Jobless Claims, Existing Home Sales, and coming PMIs will be instrumental in assessing the well-being of the US economy and determining USD direction. • Persistent tensions in Gaza and Ukraine, as well as US-China trade tension, can drive safe-haven flows into JPY, supporting downside pressure on USD/JPY. • Strong technical support is at 143.20 and 142.35, with resistance around 145.00–145.40. RSI close to the oversold zone on shorter timeframes indicates potential for near-term consolidation or a small bounce before the next move. Markets should keep a close eye on major events influencing the USD/JPY pair, as various factors still determine its short-term course. The hawkish stance of the Bank of Japan, fueled by robust domestic indicators such as the recent Machinery Orders jump, is likely to create room for additional interest rate increases, which would strengthen the Yen. Geopolitical tensions and global economic instability are also expected to continue driving demand for the safe-haven JPY. In contrast, the US Dollar remains under pressure amid weak macroeconomic data, fiscal concerns linked to President Trump’s proposed tax bill, and growing speculation about Federal Reserve rate cuts. Technically, the pair faces strong resistance near 145.00–145.40, while a break below 143.20 could trigger deeper losses, making upcoming US data and global sentiment key factors to watch. The Japanese Yen is still underpinned by robust domestic data, BoJ rate hike prospects, and haven demand. On the other hand, USD/JPY is threatened by a soft US Dollar due to fiscal worries and Fed rate cut predictions. The next move will be led by key levels and future economic releases. •  The Japanese Yen touched a two-week high due to robust domestic fundamentals as well as haven inflows. • Japan’s Core Machinery Orders increased 13% in March, beating forecasts and reinforcing economic optimism. • Positive news reinforces speculation that the Bank of Japan will keep hiking interest rates. • The US Dollar continues to be pressured by fiscal worries and Federal Reserve rate-cutting expectations. • Ukraine and Gaza conflict and US-China trade tension fuel safe-haven flows into JPY. • Major resistance is at 145.00–145.40, with a break below 143.20 having potential to propel USD/JPY to further downside. • Investors should monitor US jobless claims, housing sales, and PMIs for new direction in USD/JPY. Japanese Yen continues to benefit from a mix of favorable domestic news and increased global uncertainty. Recent statistics indicating a steep rise in Japan’s Core Machinery Orders have brightened optimism about the nation’s economic revival, supporting belief that the Bank of Japan might continue with additional interest rate increases. This represents a major change from Japan’s history of ultra-loose monetary policy and indicates strengthening faith in homegrown demand and inflation stability. Moreover, hopes of increasing wages and consumer consumption are underpinning the wider picture for continued growth in Japan. USD/JPY DAILY PRICE CHART CHART SOURCE: TradingView Globally, the Yen is also enjoying its habitual safe-haven status with increased geopolitical tensions and fears about the US fiscal condition. The recent US tax bill, which would substantially increase the federal deficit, has created investor concern about the long-term economic soundness of the country. Concurrently, persistent tensions in the likes of Ukraine and the Middle East, and reviving trade tensions between the US and China, are contributing to market volatility. These events are forcing investors to turn to safe assets, and the Yen has been the favored pick in uncertain times. TECHNICAL ANALYSIS USD/JPY currency pair is demonstrating bearish momentum, with current price action having difficulty maintaining any serious recovery. The duo has been facing resistance in the 144.40 area, which is a significant retracement level as well as the 200-period SMA on the 4-hour chart and indicates sustained selling interest at higher prices. Oscillators on the daily chart are starting to turn bearish, indicating an increasing downside bias. Concurrently, the Relative Strength Index (RSI) on smaller timeframes is moving towards oversold levels, suggesting a possible short-term consolidation or corrective bounce. A clear violation of the 143.20 support level would set off selling pressure, exposing levels of 142.35 and further beyond to the 142.00 psychological level. FORECAST USD/JPY pair is able to stay above significant support points and sentiment surrounding the US economy turns positive, there’s scope for a short-term recovery. A welcome surprise in future US economic reports, for example, jobless claims or housing numbers, may provide short-term relief for the US Dollar. Then the pair may try to retest the 145.00 psychological level. A persistent break above here may set the stage for a rise up to the 145.35–145.40 resistance area, provided investor sentiment becomes bullish on riskier assets and the Federal Reserve dials back its dovish tone. Conversely, further US Dollar weakness on the back of fiscal worries, dovish Fed hopes, or weak macroeconomic data may keep piling pressure on USD/JPY. When the pair falls below the 143.20 mark, which is a key Fibonacci support, it could unleash heavy technical selling. This would project the fall further to 142.35 and even to the 142.00 area. Additional geopolitical tensions or robust Japanese numbers might support the safe-haven demand for the Yen, extending the move lower in the next sessions.

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Currencies

USD/CHF Dips to Two-Week Low as Dollar Weakness and Safe-Haven Flows Drive Swiss Franc Higher

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  • May 21, 2025
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USD/CHF currency pair has continued its losing streak for the third day in a row, dropping to a two-week low at the 0.8220 level due to ongoing US Dollar weakness and an increase in safe-haven buying of the Swiss Franc. The greenback pressure to the downside is fueled by rising US fiscal worries following an unexpected sovereign credit rating downgrade, in addition to growing speculation that the Federal Reserve will lower interest rates further this year as inflation is easing and growth is slowing. Moreover, renewed US-China tensions over chip export controls have weighed on market sentiment, supporting demand for safe-haven assets such as the CHF. In the absence of significant US data releases, eyes now shift to speeches by FOMC members and geopolitical events to drive the near-term path of the pair. KEY LOOKOUTS • Market participants will carefully listen to statements from Federal Reserve officials for new indications of the timing and magnitude of prospective rate reductions. • Rising geopolitical tensions, particularly surrounding chip export ban tensions and retaliatory threats, may support safe-haven flows and benefit the Swiss Franc. • No significant data is scheduled for midweek, but future releases on growth, inflation, or employment might affect USD sentiment and determine the way the pair goes. • Any additional decline in global risk appetite or return of market volatility might make the CHF stronger and continue to apply pressure to USD/CHF. USD/CHF pair is still at risk of further declines on a mix of bearish sentiment around the US Dollar and persistent demand for safe-haven currencies such as the Swiss Franc. Market focus will be placed on near-term speeches from influential FOMC members, which may provide new insights into the Fed’s monetary policy direction, particularly in light of increasing interest rate cut expectations. In addition, increased US-China trade tensions related to chip export restrictions are likely to hurt investor sentiment, potentially triggering additional safe-haven flows into the CHF. With few economic data points on the calendar, broad risk appetite and geopolitics will be instrumental in dictating the near-term direction of the pair. USD/CHF pair continues to face pressure as continuous USD weakness and increasing safe-haven demand for the Swiss Franc act on the pair. Attention now turns to FOMC speeches and US-China trade tensions, which may further impact short-term market mood. •  USD/CHF falls to two-week low, trading near 0.8220 level in face of continuous selling pressure on US Dollar. •  US fiscal woes and a recent sovereign credit rating downgrade remain overhanging the greenback. •  Bets on a rate cut by the Fed become increasingly strong with evidence of slowing inflation and a weak US economic outlook. •  Safe-haven demand for the Swiss Franc is intensifying, further pinning back the USD/CHF pair. •  US-China trade tensions intensify over chip export controls, damaging world risk sentiment and underpinning CHF strength. •  Deficiency of significant US economic data turns attention in the market towards FOMC members’ speeches for policy direction. •  Technical and fundamental bias is still bearish, and there is potential for additional decline in the near future. The USD/CHF currency pair is presently subject to a mix of international and local drivers that are beneficial for the Swiss Franc. Continued unease about the fiscal condition of the U.S., particularly in the wake of recent sovereign credit rating downgrade for the country, has dented investor confidence in the U.S. Dollar. Further added to this is increased speculation that the Federal Reserve can consider interest rate reductions later this year with signs of inflation softening and economic growth slowing down. These trends have helped bring about a consistent weakening of the value of the Dollar, underpinning demand for traditionally safer assets such as the Swiss Franc. USD/CHF DAILY PRICE CHART CHART SOURCE: TradingView Besides local economic issues in the U.S., geopolitical tensions are also at large contributing to guiding market behavior. The renewed trade tension between the U.S. and China—initiated by export controls regarding cutting-edge chip technology—has generated new worries over global trade stability. The sharp response by China to U.S. actions has disturbed markets and spurred a flight to safety, which normally favors such currencies as the Swiss Franc. With little key economic data on the horizon in the near term, market players are keeping a close eye on central bank commentary and geopolitical developments to gauge the next set of moves in global currency markets. TECHNICAL ANALYSIS USD/CHF pair is trending downwards, indicating persistent bearish pressure. The pair is below crucial moving averages, which suggests a dominant short-term bearish bias. Momentum gauges like the Relative Strength Index (RSI) continue to be bearish, indicating ongoing selling pressure. Failure of the pair to maintain above the prevailing support zone may bring about the doorway for further losses. Yet any hoped-for reversal is expected to find resistance close to recent swing highs, where the sellers are likely to return to market. FORECAST USD/CHF pair may emerge if the market mood turns in favor of the US Dollar. This may happen if future speeches by Federal Reserve policymakers take a more hawkish tone, underestimating the probabilities of imminent rate cuts. Second, and perhaps more importantly, any resolution or relief in US-China trade tensions may dampen safe-haven demand, in turn weakening the Swiss Franc and favoring a bounce in the pair. Friendly surprises in major US economic indicators like higher-than-anticipated GDP or inflation figures may also give the USD a much-needed boost in the near future. On the negative side, the USD/CHF cross is still exposed to lower levels as the bearish forces continue. Renewed worries about the US fiscal situation coupled with growing market optimism regarding future Fed rate reductions are most likely to continue exerting downward pressure on the Dollar. Furthermore, if geopolitical tensions between the US and China heighten, Swiss Franc safe-haven flows can continue to strengthen. Under these conditions, the USD/CHF pair might continue its recent losses and challenge lower levels of support as safety demands from investors surpass risk appetite.

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