The US Dollar is facing renewed challenges, causing the USDJPY pair to erase recent losses. The market’s expectations for US interest rates match the Federal Reserve’s forecast of two cuts in 2025. Recent weak US jobless claims data contributed to a drop in the US Dollar, but the figures stayed below the cycle high of 260,000. In Japan, talks about cutting down on super-long bond issuances have weakened the yen. There is uncertainty about another rate hike, but expectations have grown due to rising Japanese inflation. The US-Japan trade deal and inflation patterns are crucial for the Bank of Japan. ### USDJPY Technical Movement On the charts, USDJPY shows some technical movements. On the daily chart, the pair rejected the 146.00 level and is nearing the 142.35 support zone. Buyers might enter the market here, while sellers will look to push lower towards 140.00. The 4-hour chart reveals a recent decline in the US Dollar following the jobless claims data. The 1-hour chart indicates a minor downward trendline, suggesting continued bearish momentum, with sellers eager to establish new lows. Key upcoming economic data includes the US ISM Manufacturing PMI, US Job Openings, US ADP, US NFP report, and Japanese wage data, along with US Jobless Claims figures. So far, softer US labor market data has put pressure on the US Dollar, erasing earlier gains in USDJPY. This has caused a new downward trend as traders adjust their pricing of interest rates based on the Federal Reserve’s 2025 guidance. While the claims data remains well below recent highs, it shakes confidence but doesn’t call for immediate policy changes. The message is clear: weak job data makes traders less interested in long positions for the dollar in the short term. ### Developments in Japan Japan has also contributed to market shifts. Officials are discussing reducing the issuance of long-term government bonds, which led to a slight overreaction in debt markets. As bond yields decreased, the yen also fell. Coupled with higher-than-expected inflation data, rate traders are reconsidering whether the Bank of Japan might implement another hike in the next two policy meetings. This change in expectations has begun to create some buying and selling flows in what was once a one-sided market. ### Current Trading Setup We see the USDJPY trading in a sensitive zone. On daily charts, the rejection above 146.00 corresponds with past supply, while the slow movement toward 142.35 suggests a region ready to be tested. Whether this becomes a base depends largely on how buyers respond at this level. Most traders view the 140.00 support as a significant breakpoint. There’s room to move, but it’s getting tighter. Shorter timeframes offer additional insights. The 4-hour candles show that following the jobless claims report, a series of lower highs have formed. While not drastic, this signals that sellers are taking advantage of bullish moments instead of waiting for breakouts. The 1-hour charts reflect similar pressure, with a descending trendline holding steady and no strong efforts to break upward convincingly. Traders are paying close attention to a busy economic calendar in the upcoming week. The US ISM Manufacturing PMI often sets the tone at the start of the month and is a good indicator of demand. We’ll also monitor the ADP private payroll figures — though erratic, it gives the market an early glimpse ahead of the NFP. If both indicators soften even slightly, it could strengthen the case for the Fed’s dovish stance. Additionally, if job vacancies continue to fall, it would signal diminished wage pressure — another point for dollar bears. On Japan’s side, weekly wage data might spark speculation. If earnings rise steadily, it allows Tokyo some political and policy flexibility. This is data the Bank of Japan will likely interpret as a reason to tighten conditions, even gradually. Persistent inflation increases the risk of mispricing. ### Conclusion As price action continues within this descending channel, we are approaching a strategically important moment. The current bearish trend isn’t aggressive, but it is consistent enough to build conviction. Until buyers can break this pattern with a solid reclaim of previous highs on lower timeframes, there’s little reason to expect upward movement. Those hoping for reversals will need better labor data or a stronger response from US policymakers against the dovish trend. As we enter another data-rich period, there’s significant downward pressure—both macro-wise and in market positioning. We’ll closely observe where weak support gives way to actual volume, as this will indicate new risk setups.

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