The Japanese Yen is under pressure again, with USD/JPY heading straight for the 147 level, as the shadow of a trade war looms over the market.

Technical Outlook: 147.14 as a Key Breakthrough Point

USD/JPY rose 0.42% intraday on Tuesday, hovering around 147.00. From a technical chart perspective, the pair is approaching the 38.2% Fibonacci retracement level of the decline from January to April—147.14, a critical resistance.

Once this barrier is broken, attention will shift to the June high of 148.03. If the rally continues, the May high of 148.65 and even the round number at 150.00 could be tested. The Relative Strength Index (RSI) has risen to around 61, indicating sufficient buying momentum but not yet in overbought territory, suggesting room for further upward movement.

If USD/JPY pulls back, 146.00 will serve as an important support level. A break below it could confirm the 50-day simple moving average at 144.66 as a key level, with 142.00 as the next defensive line.

Rising Trade Tensions Put Yen Under Pressure

The Trump administration has officially notified Japan that starting August 1, all Japanese exports to the US will face a unified 25% tariff. This aggressive tariff stance, combined with Japan’s existing 25% tariffs on cars and 50% on aluminum and steel products, has put this export-dependent economy in a difficult position.

Japanese Prime Minister Shinzō Abe called for rationality on Tuesday, emphasizing Tokyo’s desire to maintain dialogue. Japan’s chief trade negotiator, Yoshio Hachiro, admitted, “Without an auto tariff agreement, reaching an agreement with the US is meaningless.” Negotiations between the two countries are progressing slowly, and market sentiment is clearly cautious.

The Real Focus Is on the FOMC Minutes

The continued strength of USD/JPY ultimately stems from rate expectations. The Bank of Japan maintains an ultra-loose policy with rates at 0.5%, while the Federal Reserve’s benchmark rate remains steady at 4.25%-4.50%, keeping the interest rate differential in favor of the dollar.

The key variable will be the release of the June FOMC meeting minutes on Wednesday. What is the FOMC? Simply put, it is the Federal Open Market Committee, the Fed’s highest decision-making body, and its meeting minutes reveal the Fed’s true assessment of inflation and the economy, as well as the potential for future rate cuts.

Currently, according to the CME FedWatch tool, there is a 62.9% chance of a 25 basis point rate cut in September. If Wednesday’s minutes show stronger-than-expected data and a more hawkish tone, market expectations for rate cuts could be re-priced, potentially causing sharp volatility in USD/JPY.

Once rate expectations shift, the exchange rate will follow. This is the biggest uncertainty at the moment.