The US Dollar Retraces Amid Rumours of Potential Tariff Reductions for China

Recent US data points to improvement in the manufacturing sector: the Purchasing Managers’ Index (PMI) reached 50.7, exceeding forecasts. However, both the composite index and the services PMI came in below expectations.

Particular attention is being drawn to discussions within the White House regarding a potential reduction in tariffs on Chinese imports — a move that could significantly impact trade relations and support a strengthening of the US dollar.

Moreover, speculation regarding the resignation of Federal Reserve Chair Jerome Powell appears to have been exaggerated, which could also be perceived as a bullish signal for the USD. Together, these factors set the stage for an upward correction in currency pairs such as USD/JPY and USD/CAD.

USD/JPY

Having narrowly missed revisiting last year’s lows near 139.60, the USD/JPY pair reversed course and at one point yesterday traded above 143.00. On the daily timeframe, a bullish “piercing pattern” is potentially forming. Technical analysis suggests there may be room for continued upward correction towards the 145.00–145.50 region. A resumption of the downward trend may only be considered upon a firm break below the 140.00 level.

Key events likely to influence USD/JPY pricing today include:

• 15:30 (GMT+2): Initial Jobless Claims (US)
• 18:00 (GMT+2): Kansas City Fed Manufacturing Index (April)
• 20:00 (GMT+2): Atlanta Fed’s GDPNow Estimate (Q1)
• 23:30 (GMT+2): Federal Reserve Balance Sheet
• 23:30 (GMT+2): Reserve Balances at Federal Reserve Banks

USD/CAD

The downward move in USD/CAD has slowed around the 1.3800 level. A bullish hammer candlestick has formed on the daily chart, though a clear upward momentum has yet to emerge. Should a correction develop, price could climb toward the 1.3950–1.4000 range. Conversely, a break below the recent low may open the path toward 1.3640–1.3600.

Key events likely to affect USD/CAD pricing in the coming days:

• Tomorrow at 15:30 (GMT+2): Core Retail Sales (February)
• Tomorrow at 15:30 (GMT+2): Manufacturing Sales (March)
• Tomorrow at 15:30 (GMT+2): Headline Retail Sales

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