Forex Analysis & Reviews: 25.06.2025 - USD/JPY: Japanese Yen...

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25.06.2025 06:46 PM

USD/JPY: Japanese Yen Weakens Amid Declining Demand for Safe-Haven Assets

At the moment, the yen remains overshadowed by the U.S. dollar.From the perspective of the Bank of Japan's domestic policy, the summary of the June meeting reveals that some policymakers favor maintaining current interest rates due to uncertainty surrounding the impact of U.S. tariff wars on the Japanese economy. This exerts pressure on the yen, as the absence of new stimulus measures may reduce the currency's appeal.

However, investors lean toward the view that the Bank of Japan may still raise interest rates in the future due to signs of mounting inflationary pressure. Supporting this is the rise in the Services Producer Price Index (PPI), which has stayed above 3% year-on-year for the third consecutive month as of May. This growth could become an additional factor supporting the yen.

Bank of Japan board member Naoki Tamura noted that inflation in May rose more than expected and that the situation with U.S. tariffs is becoming less uncertain. He emphasized that if price growth continues, the central bank may be forced to act decisively. These comments reinforce expectations of potential future borrowing measures by the Bank of Japan, which could lend support to the yen.

On the other side of the pair, Federal Reserve Chair Jerome Powell stated that inflation will start to rise soon and that the central bank is in no hurry to cut rates. His comments followed recent suggestions by colleagues about a potential rate cut as early as the July meeting. However, these statements did not leave a strong impression on the dollar.

This creates pressure on the dollar, helping to maintain its weaker position against the yen.

The geopolitical situation remains tense: the ceasefire between Israel and Iran came into effect on Tuesday and is holding for now. However, ongoing incidents — Israeli attacks on Tehran and Iranian missile strikes — keep the risk of conflict elevated. Both sides claim victory and signal readiness to resume hostilities if necessary. These developments continue to support demand for safe-haven assets such as the yen.

Overall, the combination of domestic monetary policy, rate expectations, and geopolitical instability creates a favorable environment for sustained support for the Japanese currency.

From a technical perspective, the pair is attempting to break through resistance at 145.75. Oscillators on the daily chart remain in positive territory, confirming a bullish outlook. However, on the hourly and 4-hour charts, oscillators are mixed, so traders should exercise caution when opening new positions.

The next resistance level for the pair is around 146.30, followed by the key psychological level at 147.00. Support lies near 145.00, after which the bias may shift in favor of the bears.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.