USD/JPY steadies as BoJ stays hawkish amid US tariff uncertainty, breakout above 148.50 eyed

• USD/JPY trades flat on Tuesday after surging nearly 2% in the previous day, supported by a stronger US Dollar on easing trade tensions.
  
  
• BoJ signals commitment to gradual rate hikes, viewing US tariffs as short-term disruptions with limited impact on long-term inflation.
  
  
• Technically, the pair faces resistance at 148.65, with key support at the 50 EMA and downside risk toward 145.00 and 142.00.

The Japanese Yen (JPY) is holding steady near 148.00 against the US Dollar (USD) on Tuesday, pausing after a steep rise in the previous day. Despite the short pullback, the US Dollar remains resilient, supported by a temporary easing in US-China trade tensions. Over the weekend, negotiators from both sides met in Switzerland and agreed to reduce tariffs to 30% for the US imports from China and 10% for Chinese imports, for a 90-day period, restoring some investor confidence and risk appetite. Meanwhile, Japan appears to be holding firm in its tariff negotiations with the US, possibly aiming to buy time in the hope that domestic pressure in the US will lead to a better deal. Talks so far have not yielded significant results.

On the Japanese side, the Bank of Japan (BoJ) continues to adopt a cautiously hawkish stance despite growing concerns over trade-related headwinds. Speaking in parliament on Tuesday, BoJ Deputy Governor Shinichi Uchida said the central bank expects both wages and prices to keep rising, reaffirming the board's view that underlying inflation pressures remain intact. Uchida noted that while US tariffs could hurt near-term economic growth, the BoJ would continue to raise interest rates if the current economic and inflation outlook unfolds as projected.

This policy direction is in line with the BoJ's April 30-May 1 policy meeting summary, which characterized the tariff effects as short-term shocks with limited long-term impact on inflation or growth potential. Nonetheless, policymakers emphasized the need to remain flexible and monitor downside risks closely as global uncertainty persists.

Market participants are now focused on the upcoming US Consumer Price Index (CPI) data for April, scheduled for release later today. Economists expect the headline CPI to rise 0.3% month-over-month, maintaining an annual rate of 2.4%, while core CPI is anticipated to increase by 0.3% in April, holding steady at 2.8% year-over-year.

USD/JPY consolidates near 148.00, bulls eye 148.65 breakout while key support holds above 145.00

Technically, the pair decisively broke above the 50-day Exponential Moving Average (EMA) on Monday but faced intraday rejection on Tuesday at the previous day's high of 148.65. A sustained move above this resistance could open the door for a rally toward the 150.00 psychological mark, which aligns with the 200 EMA at 149.64 and April's swing highs.

On the downside, the 50-day EMA now offers immediate support near 146.30. A break below this level may shift focus toward the 145.00 psychological level. Failure to hold above that zone could attract further selling pressure, exposing last week's low around the 142.00 region

The Relative Strength Index (RSI) on the daily chart is trending higher, approaching the overbought region, but currently sits at 59.68, suggesting bullish momentum.