Usdjpy rises as Japan’s trade balance improves but challenges persist

USDJPY Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	0.35%	50.7 Pips
Week to-date	0.9%	130.3 Pips
June	0.94%	134.9 Pips

Upcoming key events (London Time)

Wed 07:00 PM USD Fed Interest Rate Decision (Federal Funds Rate)
Wed 07:00 PM USD FOMC Economic Projections
Wed 07:00 PM USD Interest Rate Projections

What happened lately

In May 2025, Japan’s economic indicators exhibited mixed signals. The country’s Adjusted Merchandise Trade Balance saw an improvement from -408.91¥ in April to -305.5¥ in May. However, the total merchandise trade balance dropped significantly to -637.6¥ compared to the revised figure of -115.6¥ in April. These figures suggest a wider deficit, which may point towards economic challenges. Imports over a year plummeted by -7.7% in May, a steeper decline compared to April’s -2.2%. Exports also showed a decline in their annual growth rate, falling to -1.7% from April’s positive 2%. This overall trade performance indicates ongoing strain in Japan’s trade activities. Despite these changes, the Bank of Japan maintained a Short-Term Policy Interest Rate of 0.5%, consistent with the previous rate.

In the United States, the economic data for May 2025 showed a decrease in Industrial Production, which lowered from 0% in April to -0.2%. Retail Trade indicators presented a downward trend, with Monthly Retail Trade retracting to -0.9% from -0.1% previously, indicating reduced consumer spending. Despite this, the Retail Trade Control Group rose to 0.4%, indicating some resilience. Additionally, the Empire State Manufacturing Index declined from -9.2 points in May to -16 points in June, demonstrating weakening manufacturing activity.

The USDJPY exchange rate rose by 0.35% to 145.21. The contrasting economic performance of the U.S. and Japan contributes to this movement. Japan’s weak trade data may place downward pressure on the yen, making it less attractive to investors compared to the U.S. dollar. Despite the U.S. displaying some economic weaknesses, the anticipation of upcoming developments related to the Federal Reserve’s interest rate and economic projections is likely causing support for the dollar. Investors might be positioning themselves ahead of the Fed’s meeting as they await the outcomes that could influence U.S. monetary policy, thereby affecting USDJPY movements further. Continued focus on economic data and monetary decisions will likely be the key drivers for the currency pair’s future trends.

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What can we expect from USDJPY today?

USDJPY on Tuesday rose 0.35% to 145.21. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for USDJPY looks bullish as the pair ended higher after Tuesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 145.61 with break above could target R2 at 146.01. While towards the downside, we are looking at daily low of 144.36 as an important support. Break below this level could weaken the current bullish momentum. A break above 145.38 would suggest bullish bias after recent positive movement.

For the week to-date, take note that USDJPY is mixed as compared to prior week.

Key levels to watch out: