Japanese Yen slides to near one-week low against USD after Trump's new tariffs

• The Japanese Yen weakens further against USD amid concerns about Trump's trade tariffs.
• Bets for more BoJ rate hikes and the risk-off mood could limit losses for the safe-haven JPY. 
• The narrowing US-Japan rate differential might also contribute to cap the USD/JPY pair. 

The Japanese Yen (JPY) drifts lower against its American counterpart for the second straight day on Monday and moves away from over a one-month high touched last week. Concerns about the economic fallout from US President Donald Trump's trade tariffs to a large extent, overshadow the hawkish Bank of Japan (BoJ) Summary of Opinions and undermine the JPY. Apart from this, a broad-based US Dollar (USD) rally pushes the USD/JPY pair to the 156.00 neighborhood, or a four-day top during the Asian session. 

Meanwhile, a rise in Tokyo's core inflation by the fastest annual pace in nearly a year keeps market expectations for further interest rate hikes by the Bank of Japan (BoJ). Moreover, a fresh wave of the global risk-aversion trade, along with the narrowing interest rate differentials between Japan and the rest of the world, could offer support to the safe-haven JPY. Adding to this, the recent decline in the US Treasury bond yields might hold back the USD bulls from placing aggressive bets and cap gains for the USD/JPY pair. 

Japanese Yen is weighed down by concerns about the impact of Trump's trade tariffs

• US President Donald Trump signed an order on Saturday to impose 25% tariffs on Canadian and Mexican imports and 10% on goods from China starting on Tuesday.
• Canada's Prime Minister Justin Trudeau, Mexico's President Claudia Sheinbaum, and China's foreign ministry were quick to respond with the upcoming tit-for-tat moves.
• The US Dollar rallies across the board and advances back closer to over a two-year high touched in January, which assists the USD/JPY pair to build on Friday's move up. 
• The Bank of Japan's Summary of Opinions released earlier this Monday showed that policymakers discussed the likelihood of raising rates further at the January meeting.
• BoJ board members reiterated that it will be necessary to continue hiking rates, if economic activity and prices remain on track, though it does little to boost the Japanese Yen. 
• Japan's Finance Minister Katsunobu Kato said that the government intends to monitor the impact of Trump's new tariffs on its currency amid worries about the fallout.
• The US-Japan yield differential hovers near a multi-week low. This, along with the risk-off impulse, could help limit a further JPY depreciation in the near term. 
• Traders now look forward to this week's important US macro releases scheduled at the start of a new month, starting with the ISM Manufacturing PMI later today.
• The focus, however, will remain glued to the US monthly employment data - popularly known as the Nonfarm Payrolls (NFP) report due for release on Friday. 

USD/JPY might struggle to capitalize on the positive move beyond the 156.25 resistance

From a technical perspective, last week's goodish rebound from the 50% retracement level of the December-January rally and the subsequent move up favor bullish traders. That said, any further strength beyond the 156.00 mark might confront some hurdle near last week's swing high, around the 156.25 area. A sustained strength beyond the said barrier could trigger a fresh bout of a short-covering rally and lift the USD/JPY pair to the 156.70-156.75 region en route to the 157.00 round figure and the 157.60 horizontal barrier. The momentum could extend further towards the 158.00 mark, above which spot prices could aim to retest the multi-month top, around the 158.85-158.90 region touched on January 10.

On the flip side, the 155.00 psychological mark now seems to protect the immediate downside ahead of the 154.55-154.50 horizontal zone and the 154.00 round figure. This is closely followed by the January monthly trough, around the 153.70 area touched last Monday. A convincing break below the latter would be seen as a fresh trigger for bearish traders and make the USD/JPY pair vulnerable to accelerate the fall further towards the 153.30 support. Spot prices could eventually drop to the 153.00 mark.