The USD/JPY pair has been in a consistent downtrend for the fourth consecutive week. On Tuesday, sellers pushed the pair to the edge of the 139.00 area, hitting the lowest price levels in seven months. The yen continues to attract increased demand as a safe-haven asset, while the dollar remains under pressure due to rising recession risks in the U.S. The "U.S. vs. everyone" trade war not only continues but is intensifying—especially between the U.S. and China, the world's two largest economies.

In addition, the greenback faces added pressure from Trump's attacks on the Federal Reserve. Market participants fear the president could attempt to remove Jerome Powell from office despite lacking a legal basis for such action. Trump's persistent criticism of Powell weighs on the dollar. On Monday, the president referred to him as "Mr. Too Late," implying the Fed is acting too slowly on rate cuts.

Indeed, the U.S. President could attempt to dismiss the Fed Chair by interpreting his inaction as professional misconduct ("improper behavior"). However, such an executive order would be challenged in federal court, where, according to most experts, the judges would likely side with Powell.

Still, the mere fact of an "attack on the independence" of the Federal Reserve is enough to rattle financial markets. If Trump signs an order to remove Powell, it would trigger severe market volatility, regardless of whether the order is eventually implemented or struck down in court.

Meanwhile, the U.S.–China trade war has escalated to a new level. Last week, reports emerged that the White House wants to convince dozens of countries to reduce trade with China in exchange for individual tariff concessions. On Tuesday, China issued a mirror response, with officials warning that any country reducing ties with China to secure a deal with Trump would face retaliation. According to China's Ministry of Commerce, Beijing "opposes any side making deals at the expense of China's interests and will respond firmly." Simultaneously, China proposed that affected countries consolidate and jointly push back against the U.S.

Media reports (notably from Politico) also suggested that Trump effectively blocks efforts to rebuild ties with Beijing because he wants to meet with Xi Jinping first. However, the Chinese side has taken a wait-and-see approach and is in no rush to accommodate Washington. The situation remains unresolved, the trade war continues, U.S. recession risks are rising, and the dollar stays under pressure.

Almost all major banks and financial analytics firms have downgraded their outlooks. S&P Global, for example, raised its U.S. recession probability to 30–35%, up from 25% in March. Goldman Sachs sees a 45% probability, while JPMorgan estimates it at 60%. UBS and Barclays have also warned that the U.S. economy may slow in the coming months.

This fundamental backdrop continues to exert intense pressure on the dollar. On Tuesday, the U.S. Dollar Index once again tested the 97.00 level, hovering near three-year lows over the past two days.

However, the USD/JPY decline is not solely due to dollar weakness: the yen is also strengthening across the board (look at crosses like GBP/JPY, EUR/JPY, AUD/JPY) thanks to growing expectations of a Bank of Japan rate hike. BOJ Governor Kazuo Ueda recently noted that real interest rates remain very low, allowing the central bank to continue raising rates "if economic and price conditions evolve in line with forecasts." BOJ board member Junko Nakagawa echoed this view. Japan's overall CPI rose by 3.6% y/y in March (in line with expectations), while core CPI accelerated to 3.2%. The CPI excluding fresh food and energy (a key inflation gauge tracked by the BOJ) also climbed to 2.9%, up from 2.6% in February.

This creates a fundamentally bearish picture for USD/JPY, suggesting further downside is likely. Technicals align with this outlook: on the daily chart, the pair is trading between the middle and lower bands of the Bollinger Bands indicator and remains below all Ichimoku lines, which have formed a bearish "Parade of Lines" signal. The first bearish target is 139.50 (lower Bollinger Band on D1); the main target is 139.00 (lower Bollinger Band on MN).