USDJPY, Gold Outlook: New Tariffs Keep the DXY and Gold on a Bullish Edge

Key Events

• China’s CPI Improves, PPI Deflation Persists
• U.S. CPI Set to Move Markets This Week Alongside Trump’s Tariff Announcements
• Technical Analysis: Gold and USD/JPY – 3-Day Time Frame

The new tariffs imposed this week are intensifying economic uncertainties, fueling safe-haven demand for gold, and keeping the dollar strong in the short term. Trump is set to clarify his progressive tariff announcements this week between foreign imports and 25% tariffs on aluminum and steel. Gold surged past $2,890 in early Monday trading, reflecting growing investor concerns over global trade tensions and potential retaliations. Meanwhile, the U.S. dollar is maintaining its bullish hold above 108, yet the broader implications of tariffs on foreign imports could heighten inflation risks, which may weaken the greenback in the long run.

USDJPY Holds above 151 Support Zone 

The U.S. dollar faces critical volatility this week, influenced by tariffs, potential retaliatory measures, and the upcoming U.S. CPI report. Despite strong ISM manufacturing and services PMI readings, the NFP data fell short, coming in at 143K versus the previous 307K. As the Federal Reserve keeps interest rates on hold, upcoming inflation data could either ease market fears or trigger further bearish pressure from the dollar.

The latest CPI data showed core inflation improving toward August 2024 lows at 0.2%, but the yearly CPI surged to August 2024 highs, while the monthly CPI climbed to April 2024 highs at 2.9% and 0.4%, respectively. Meanwhile, the Japanese yen has regained strength, supported by Bank of Japan (BOJ) policies and an exhausted bullish momentum in the U.S. dollar.

Gold flirts with record highs above 2890

Market uncertainty continues to fuel gold’s haven appeal, as Trump’s rapid and successive tariff announcements on imports have intensified trade war concerns. Gold’s latest surge above $2,890 marks a key resistance zone, with major financial institutions extending their 2025 gold price projections toward $3,000. China’s CPI data showed a notable improvement from 0.1% to 0.5%, hitting a five-month high and supporting gold demand, yet PPI deflation persists, reflecting continued challenges in China’s industrial sector.

Technical Analysis: Quantifying Uncertainties

USDJPY Outlook: 3-Day Forecast – Log Scale

Source: Tradingview

The Japanese yen rebounded last week, pushing USD/JPY toward the 151-support zone, just above the midpoint of a duplicated channel from the Yen’s primary trend (2023–2024) at 149.

• Volatility risks are high with the upcoming U.S. CPI report on Wednesday.
• A drop in inflation data could accelerate the downtrend toward 149 and 147, aligning with the 0.618 Fibonacci retracement level of the September 2024 low to January 2024 high.
• Upside resistance: The 153.60 zone (former support) now acts as a strong resistance, followed by 156 (Jan 2023–2024 trendline) and the 158.80 high of 2025.

Gold Outlook: 3-Day Forecast – Log Scale 

Source: Tradingview

Gold remains firmly above the $2,890 mark, targeting the $2,900 zone as U.S. CPI week unfolds. Current levels are critical, given that the RSI aligns with November 2024 highs, where gold previously retreated nearly 100 points following the elections.

Additionally, gold is approaching the lower boundary of the long-term up trending channel from October 2023 to October 2024, near the $2,920 and $3,000 resistance levels. On the downside, key support levels at $2,820, $2,790, and $2,730 are expected to act as reversal zones if gold faces a pullback from its current highs.

Written by Razan Hilal, CMT

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