The came under renewed pressure on Thursday as investors grappled with deepening political uncertainty and rising tariff concerns.
Meanwhile, the weakened following the release of disappointing , stoking expectations of a potential by the Reserve Bank of Australia (RBA).
Yen Weakens as Japan Faces Political and Fiscal Risks
The yen depreciated further against the , with USD/JPY pushing toward the key psychological level of 150. The pressure on the yen comes as Japanese voters prepare for the Upper House elections on July 20, an event increasingly seen as a barometer for public confidence in the ruling Liberal Democratic Party (LDP). Reuters
Rising discontent over and the cost of living has hurt the LDP’s standing, while the opposition’s calls to slash the national consumption tax have added to investor anxiety. Analysts warn that political instability could derail fiscal policy planning, weigh on consumer confidence, and delay much-needed structural reforms.
Compounding these concerns are reports of renewed U.S. tariff threats targeting Japanese imports—rekindling fears of a broader trade spat. While the yen is traditionally viewed as a safe-haven currency, domestic political fragility and economic headwinds are diminishing its appeal in times of global stress.
Weak Trade Data Undermines Yen’s Fundamentals
Japan’s economic fundamentals also failed to support the yen. Trade data released earlier this week showed a surplus of just ¥153.1 billion for June, well below analyst estimates. Exports declined for a second consecutive month, raising the specter of a technical recession in the second quarter. Dunya News
With the Bank of Japan maintaining its ultra-loose monetary stance and yield differentials favoring the U.S. dollar, capital outflows from Japan have intensified. This divergence continues to weigh heavily on the yen, particularly as expectations of U.S. are pushed further out.
From a technical perspective, USD/JPY has rebounded strongly from the 145.50–146.00 bullish order block and is now approaching a resistance zone at 149.726. The EMA 34, 89, and 200 indicators are aligned for a continued uptrend, while the RSI, currently around 60, indicates the pair is cooling after briefly entering overbought territory.
Australian Dollar Hit by Soft Jobs Report
In Australia, the labor market showed signs of cooling, pressuring the Australian dollar. Employment figures for June came in well below expectations, with only 7,000 jobs added compared to a forecast of 30,000. The ticked up to 4.1% from 4.0%, raising concerns that the economy may be losing momentum. CNA
The softer-than-expected report fueled renewed speculation that the RBA could pivot toward easing monetary policy sooner than previously anticipated. Although inflation remains above target, slowing job growth and weakening domestic demand could shift the central bank’s tone in upcoming meetings.
The Australian dollar responded swiftly, with AUD/USD falling below 0.6650, reversing much of the recent bullish momentum. Technical analysis shows downside risk increasing, especially if upcoming inflation or retail sales data continues to disappoint.
Currency Markets Eye Policy Divergence and Political Risk
The broader currency market is now at a crossroads, with monetary policy divergence and geopolitical uncertainty taking center stage. The yen’s decline highlights the challenges facing Japan, not just in managing inflation but also in navigating a complex domestic political environment. At the same time, the Australian dollar’s retreat underscores the sensitivity of commodity-linked currencies to labor and inflation data.
Looking ahead, investors will monitor Japan’s election outcomes, central bank commentary, and key U.S. economic releases for directional cues. In the near term, both the yen and the Aussie may remain under pressure unless political clarity or economic surprises offer a reason to reassess the bearish tone.
Stay tuned with Dupoin for expert updates, strategy insights, and live forex coverage as markets digest this high-impact economic event.
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