USD/JPY hesitates around 148.60 with the US Dollar and the Yen on the defensive

• The US Dollar treads water against the Yen amid the positive risk sentiment.
• Political uncertainty and concerns about trade tariffs keep the JPY on its back foot.
• USD/JPY: A potential double top above 149.00 is a warning for bulls.

The Dollar is trading in a choppy and volatile manner against the Japanese Yen. The succession of Doji candles in the 4-hour chart highlights a hesitant market, as both the US Dollar and the Yen struggle amid positive market sentiment.

The broader trend remains bullish, but the double top above 149.00, printed earlier this week, displays a warning for bulls. However, the pair needs to break the 146.98 neckline to confirm a trend shift.

Growing political uncertainty is weighing on the JPY

The Yen is dropping across the board on Friday, amid increasing political uncertainty on growing concerns that Prime Minister Ishiba's coalition might lose its majority in the upper house after Sunday's elections. Investors are fearing a defeat that would lead to his resignation, leaving the door open to the opposition and its tax-cutting plans that might send the Yen significantly lower against its main peers.

Apart from that, the trade negotiations with the US remain stalled, with the August 1 deadline approaching. If a better deal is not reached, Japan's exports to the US will face a 25% tariff, a significant setback for Japan's strongly trade-dependent economy.

The US Dollar, on the other hand, is not faring much better. The risk-on sentiment sparked by the bright corporate earnings seen on Thursday is weighing the US Dollar and US Treasury yields, and keeps USD/JPY upside attempts limited.
US tariffs are weighing on the US Dollar's recovery.