Revised USD/JPY Trade Setup – 08 May 2025

The USD/JPY pair remains in focus as markets digest the Federal Reserve’s policy tone and await a highly anticipated announcement from U.S. President Donald Trump regarding a potential trade deal with the United Kingdom. After testing multi-day highs near the psychologically significant 145.00 level, the pair is showing signs of hesitation as Fed Chair Jerome Powell signaled that the central bank is in no rush to cut rates, while also warning that protectionist tariffs could undermine the Fed’s dual mandate. Meanwhile, the U.S. Dollar has slipped back below the 100.00 handle on the DXY, with traders cautious over the scope and realism of the rumored trade pact.

The new data regarding the decline in U.S. Initial Jobless Claims to 228K and continued modest U.S. Dollar (USD) performance ahead of President Trump’s trade announcement provides a mixed but supportive backdrop for the current USD/JPY setup. Here’s the impact on the trade setup:


Revised USD/JPY Trade Setup – 08 May 2025

Trade Type Sell USD/JPY (Counter-Trend Setup)
Entry 144.85 – 145.00 (current: 144.81)
Stop Loss 145.60 (above key resistance, round number risk)
Take Profit 1 143.70 (support zone, near-term reversal target)
Take Profit 2 142.65 (23.6% Fibo level)
Confidence ★★★★☆ (High conviction with event-risk sensitivity)

Updated Rationale:

  • Macro Context: Despite stronger-than-expected Jobless Claims, Fed Chair Powell’s dovish tone and emphasis on policy patience has capped USD yield gains. This implies limited upside for the Greenback unless Trump’s trade announcement significantly alters sentiment.

  • Event Risk: President Trump’s 14:00 GMT press conference could generate volatility. Market skepticism over the UK trade deal’s scale suggests potential disappointment, which may lead to a knee-jerk USD pullback—reinforcing JPY strength on safe-haven appeal.

  • Technical Picture: USD/JPY is testing the 145.00 resistance area but lacks confirmation for a breakout. The RSI shows signs of slowing momentum, and prior attempts near this level have been rejected. A failure to break above 145.00 convincingly could attract profit-taking and counter-trend selling.

  • Yields and Risk Appetite: While 10-year Treasury yields hold near 4.30%, flattening yield curves and fragile risk sentiment, especially around US-China/UK trade policy, support a pullback in USD/JPY in the absence of a clear bullish catalyst.


Strategic Summary:

USD/JPY bulls are pressing against a key resistance zone, buoyed by Fed hesitation to cut and optimism around US trade policy. However, with Powell’s cautious tone, fading DXY momentum, and high event risk, the pair may be primed for a tactical retracement from the 145.00 handle. This setup is ideal for nimble, high-conviction counter-trend traders, especially ahead of a potentially underwhelming trade announcement.

In this context, USD/JPY’s rally appears stretched as bullish momentum begins to stall below resistance. Although U.S. Treasury yields remain elevated near 4.30%, Powell’s patient policy stance and market skepticism around the scale of Trump’s trade announcement create downside risk. Today’s better-than-expected U.S. jobless claims data has done little to shift the narrative, as investors remain laser-focused on geopolitical developments and the credibility of incoming trade commitments.

Technically, the 145.00 level remains a formidable ceiling without a catalyst to support a breakout. As such, a high-conviction short setup is now favored on signs of fading bullish pressure—positioned to capitalize on a potential retracement toward key support levels at 143.70 and 142.65.

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