USD/JPY climbs on yield gap, tariff threats from Trump

• USD/JPY benefits from yield differentials between the US and Japan, pushing prices above 147.00.
• Japan's economy remains at risk after Trump threatens a 25% tariff on all Japanese imports starting August 1.
• USD/JPY bulls push the Relative Strength (RSI) higher, signaling a surge in upside momentum.

The US Dollar (USD) is trading confidently against the Japanese Yen (JPY) on Friday, as yield differentials and tariff risks continue to weigh on the safe-haven Yen.

At the time of writing, USD/JPY continues to trade above 147.00 with the next psychological level of 148.00 in sight.

Both Japan and the United States operate under a dual mandate in monetary policy. However, the priorities of their respective central banks differ significantly.

The US Federal Reserve (Fed), which currently maintains its benchmark interest rates between 4.25% and 4.50%, is focused on restoring price stability. By keeping rates elevated for an extended period, the Fed aims to bring inflation down to its 2% target.

Meanwhile, the Bank of Japan (BoJ) continues to operate in a low-rate environment to stimulate economic growth. With its benchmark rate still at 0.50%, the wide gap in interest rates between the two economies has continued to attract investors to the US Dollar, pushing USD/JPY higher.

Tariff concerns are adding further pressure. Japan faces 25% tariffs on automobile exports to the US and 50% on steel and aluminium, with copper set to be added to the list in August. As Tokyo scrambles to secure a trade deal ahead of a possible 25% tariff on all Japanese imports, USD/JPY remains on the rise.

USD/JPY battles resistance at 147.00 as bullish momentum supports the upside move

The USD/JPY pair is currently trading just above the 38.2% Fibonacci retracement level at 147.14, a key technical area derived from the January high of 158.88 to the April low of 139.89. 

While a full breakout has yet to be confirmed, the pair is showing strong upward momentum, supported by consecutive bullish candles. USD/JPY price action currently holds above both the 10-day and 50-day Simple Moving Average (SMA), providing additional support at 145.31 and 144.79, respectively. 

This positioning reflects a strengthening short-term trend, though the resistance zone between 147.14 and 148.03 remains critical. 

A clear daily close above this range would strengthen the bullish case, opening the path toward the 50% Fibonacci level at 149.38. Meanwhile, the Relative Strength Index (RSI) stands at 62, suggesting continued upside potential without entering overbought territory.

USD/JPY daily chart