Japanese Yen rebounds from multi-week low against USD; lacks bullish conviction

• The Japanese Yen attracts some intraday buyers on Friday, though the upside seems limited.

• The mixed Japanese macro data boosts the case for further BoJ rate hikes and back the JPY.

• The Fed’s hawkish pause underpins the USD and could support USD/JPY amid trade optimism.

The Japanese Yen (JPY) recovers slightly from a four-week low touched against a broadly stronger US Dollar (USD) during the Asian session on Friday, though it lacks any follow-through buying. Japan’s household spending data released earlier today came in well above consensus estimates, boosting the case for further interest rate hikes by the Bank of Japan (BoJ) and lending some support to the JPY. However, real wages in Japan declined for a third straight month in March, adding to worries over the growth outlook amid tariff uncertainty. This, along with the trade optimism, should keep a lid on any further gains for the JPY.

The US-UK trade deal on Thursday raised hopes for more such deals with other countries. This comes ahead of US-China tariff negotiations in Switzerland over the weekend and remains supportive of a generally positive risk tone, which seems to act as a headwind for the safe-haven JPY. The USD, on the other hand, continues to draw support from the Federal Reserve's (Fed) hawkish pause earlier this week and easing concerns about a US recession. This could further limit any meaningful slide for the USD/JPY pair, which remains on track to register gains for the third straight week as traders await Fed speakers for a fresh impetus.

Japanese Yen bulls seem non-committed as trade deal/talks optimism undermines safe-haven assets

• Government data released earlier this Friday showed that Japan's household spending rose 0.4% in March and 2.1% from a year earlier, both surpassing market forecasts. Adding to this, expectations that sustained wage hikes will boost consumer spending and inflation in Japan suggest that the Bank of Japan may not abandon its rate-hike plans altogether.

• In fact, minutes from the BoJ's monetary policy meeting held on March 18-19 revealed on Thursday that the central bank remains ready to hike interest rates further if inflation trends hold. This, in turn, backs the case for further policy tightening by the BoJ in 2025 and assists the Japanese Yen to gain some positive traction during the Asian session on Friday.

• Separately, Japanese real wages decreased for a third consecutive month in March. In fact, inflation-adjusted wages dropped 2.1% from a year earlier following a revised 1.5% fall in February and a 2.8% decline in January. Furthermore, the consumer inflation rate used to calculate real wages rose 4.2% YoY in March, down slightly from 4.3% in the previous month.

• The data adds to worries about Japan’s growth outlook amid the uncertainty over US tariffs and ahead of a first-quarter Gross Domestic Product report next week. This, in turn, could act as a headwind for the JPY amid the upbeat market mood, led by the optimism over the US-UK trade deal and the start of US-China tariff negotiations in Switzerland over the week.

• Meanwhile, positive developments help to ease market concerns that an all-out trade war might trigger a US recession. Adding to this, the Federal Reserve's signal that it is not leaning towards cutting interest rates anytime soon, despite the heightened economic uncertainty, lifts the US Dollar to a four-week high, which, in turn, should lend support to the USD/JPY pair.

• There isn't any relevant market-moving economic data due for release from the US on Friday. However, scheduled speeches from a slew of influential FOMC members will drive the USD demand later during the North American session. Furthermore, the broader risk sentiment should contribute to producing short-term trading opportunities on the last day of the week.

USD/JPY could attract some dip-buying; Thursday’s breakout through 200-period SMA on H4 is in play

From a technical perspective, the USD/JPY pair's overnight breakout through the 200-period Simple Moving Average (SMA) on the 4-hour chart could be seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart have started gaining positive traction and are holding in bullish territory on hourly charts. This supports prospects for the emergence of some dip-buyers at lower levels, which should limit the downside for spot prices near the 145.00 psychological mark (200-period SMA on the 4-hour chart). That said, a convincing break below the said resistance-turned-support might prompt some technical selling and drag the currency pair to the next relevant support near the 144.45 region.

Meanwhile, bulls might now wait for a sustained move and acceptance above the 146.00 round figure before placing fresh bets. Some follow-through buying beyond the Asian session peak, around the 146.15-146.20 region, will reaffirm the near-term positive outlook and pave the way for a further near-term appreciating move for the USD/JPY pair. The subsequent move up could lift spot prices to an intermediate hurdle near the 146.75-146.80 region en route to the 147.00 mark. The momentum could extend further towards the 147.70 horizontal resistance before the pair aims to conquer the 148.00 round figure and climb further towards the 148.25-148.30 supply zone.