USD/JPY retreats as Trump-Powell tensions cap gains

• US Dollar retreats against the Japanese Yen, with Trump-Powell relations in focus.
• Interest rate expectations favour USD strength, but political uncertainty caps USD/JPY gains.
• USD/JPY retreats with resistance firming at 149.00.

The Japanese Yen (JPY) is attempting to recover a portion of recent losses against the US Dollar (USD) on Wednesday expectations that US President Donald Trump would fire Federal Reserve (Fed) Chair Jerome Powell heated up and then died down.

After three consecutive days of gains, USD/JPY reached an intraday high of 149.19 before retreating to trade near 148.00 at the time of writing.

While the US Dollar started Wednesday on a positive note, USD/JPY fell off a cliff in the US morning session on mounting concerns that President Trump may be considering the removal of Powell. Both the New York Times and Bloomberg said Trump was asking other officials whether he should let Powell go before his term is up in May 2026.

But then when asked directly, Trump commented, "We aren't planning on doing anything -- but we are very concerned." 

His remarks come amid criticism over the Fed's $2.5 billion headquarters renovation and Powell's perceived resistance to easing monetary policy. 

The ambiguity of Trump's statement has added a layer of uncertainty to markets already grappling with shifting rate expectations and geopolitical trade risks.

US Consumer Price Index (CPI) data on Tuesday showed that the Federal Reserve (Fed) may refrain from cutting rates in the near term as inflation jumped at the consumer level. However, the Producer Price Index (PPI) data on Wednesday demonstrated otherwise as inflation was flat at the producer level in June.

USD/JPY technical analysis: Psychological resistance remains firm at 149.00

USD/JPY daily chart

The USD/JPY daily chart shows a clear short-term uptrend, supported by the 10-day Simple Moving Average (SMA) crossing above the 50-day SMA. The pair recently broke above the 38.2% Fibonacci retracement level of the January-April decline, now holding as support at 147.14.

Although the pair experienced a slight pullback from this resistance, the Relative Strength Index (RSI) remains strong at 64, indicating continued upward strength without being overbought.

The 149.00 psychological level provides resistance with the 50% at 149.38 with a move higher opening the door for the psychological level of 150.00 and toward the next resistance level at the 61.8% retracement at 151.62. 

Meanwhile, a clear move below 147.00 would suggest a possible pause in the rally or deeper retracement toward the 10-day SMA at 146.70 and the 50-day SMA near 145.00.

Overall, the technical picture favors buyers as long as key support levels hold.