USDJPY, Gold Forecast: Bulls Recharge on Tariff and Inflation Risks

Key Events:

• Tokyo Core CPI reaches a one-year high, BOJ hints at further rate hikes
• Gold approaches record highs as a safe haven amid escalating trade war risks
• Yen strengthens, holding USD/JPY below 155

BOJ Summary of Opinions and Japanese PMIs

Following the rise in Tokyo’s core CPI to a one-year high of 2.5%, the Bank of Japan (BOJ) hiked interest rates by 25 basis points and signaled a willingness to implement further hikes this year if economic activity and inflation remain on track. This move aims also to prevent further Yen depreciation against the U.S. Dollar.

However, the latest Japanese Manufacturing PMI report showed a contraction, declining to 48.7, kicking off 2025 with weaker-than-expected optimism. This has left the Yen’s strength against the Dollar uncertain, particularly ahead of Friday’s Non-Farm Payrolls (NFP) report and in the face of the U.S. inflation outlook.

Trade War Risks Drive Gold Above Record 2,870$/ounce

While tariff negotiations between the U.S. and its two largest trade partners, Canada and Mexico, remain stalled, a 10% tariff on Chinese imports remains on the table, with no signs of imminent negotiation. Meanwhile, China has retaliated with 10-15% tariffs on U.S. goods, agricultural products, and energy exports, escalating risks of a deeper trade war between the world’s two largest economies. Amid these uncertainties, gold prices continue to rise, with the precious metal approaching critical resistance levels between $2,890 and $2,920. Until negotiations and trade deals are finalized, gold is expected to remain bullish, with volatility risks with Friday’s NFP.

Technical Analysis: Quantifying Uncertainties

USDJPY Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

As the U.S. Dollar loses momentum due to ongoing trade war negotiations—excluding China—and the Yen strengthens on rate hike expectations, USD/JPY has slipped below the 153 mark. The pair now faces support levels at 151.50, 149.50, and 147. The Relative Strength Index (RSI) has also dropped below the neutral 50 mark, reinforcing bearish momentum.

On the upside, the trendline connecting the consecutive lows between January 2023 and 2024 continues to act as strong resistance, currently sitting between 155 and 156.80, should the price break back above 154.

Gold Forecast: 3-Day Time Frame – Log Scale

Source: Tradigview

With ongoing global uncertainties, trade war risks, and inflation concerns, gold remains the preferred safe-haven investment for global investors. The metal is now climbing toward key resistance at $2,890. A strong close above this level could extend gold’s gains toward $2,920 and $3,000.

On the downside, if trade negotiations resume and trade war risks ease, gold could retrace toward key support levels at $2,820, $2,790, and $2,730, with a deeper bearish scenario possible if selling pressure intensifies below 2730.

Written by Razan Hilal, CMT

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