Yen Strengthens as Risk Sentiment Sours Amid U.S. Credit Downgrade and Renewed Trade Tensions

Key Takeaways:

*Moody’s downgrade of the U.S. credit rating stoked demand for safe-haven Yen. 
*The relationship between the U.S. and China deteriorated after the trade talks last week, pushing the safe-haven Yen to trade higher.

Fundamental Analysis

The Japanese Yen has advanced against its major peers in recent sessions, buoyed by a flight to safety as market sentiment turned cautious at the start of the week. Investors sought refuge in safe-haven assets following Moody’s downgrade of the U.S. credit outlook, which rekindled concerns over Washington’s fiscal stability and its long-term ability to meet debt obligations.

Geopolitical jitters further fueled the Yen’s rally. Tensions between the U.S. and China resurfaced after Washington warned of national security risks tied to Huawei’s chip usage—a move Beijing denounced as a breach of the bilateral understanding reached in Switzerland just a week earlier. The renewed friction between the world’s two largest economies stoked fears of a re-escalation in the trade war, prompting another shift into risk-off mode.

Additionally, the Japanese Yen found support on expectations of a currency policy dialogue between Japan’s top FX officials and the U.S. Treasury Secretary—a move seen by markets as favoring Yen stability amid recent volatility.

Technical Analysis – USDJPY

USDJPY, H4

The USDJPY pair has remained under pressure, declining over 2% from last week’s peak as bearish sentiment persists. The pair is now consolidating near the 145.20 level—below its previous support—indicating sustained downside momentum and a bearish technical bias.

Momentum indicators reinforce this view. The Relative Strength Index (RSI) is edging toward oversold territory, highlighting intensifying selling pressure. Meanwhile, the MACD has crossed below the zero line, signaling a growing bearish trend. With risk sentiment tilted toward safe-haven assets and the technical structure weakening, USDJPY may face further downside unless it regains footing above the 145.20 threshold.

Resistance levels:146.10, 148.10

Support levels: 144.00, 142,00