Today, the pair broke a three-day losing streak, as Japan's domestic political uncertainty, disappointing manufacturing PMI data, and prevailing risk appetite remain key factors limiting the yen's growth as a safe-haven currency.

The trade deal between Japan and the United States has eliminated a major risk for Japan's domestic economy, creating favorable conditions for a potential interest rate hike by the Bank of Japan. Deputy Governor Shinichi Uchida confirmed that the central bank would continue raising rates if economic conditions and inflation evolve in line with projections. According to a Reuters survey, most economists expect the Bank of Japan to raise the key rate again by the end of the year, though many also believe the decision could be delayed. These expectations continue to support the yen.

Another source of uncertainty was the defeat of the ruling LDP-Komeito coalition in the upper house elections last weekend, raising concerns about Japan's fiscal outlook. Private sector data also indicated a decline in manufacturing activity in July, with the manufacturing PMI falling to 48.8 from 50.1 in June — mainly due to the impact of U.S. tariffs. Meanwhile, the services sector showed improvement, with the PMI rising to 53.5.

Despite positive market sentiment, yen appreciation is being held back by this backdrop and by expectations of future rate hikes. The yen remains a safe-haven currency, but market optimism and the strength of risk assets could limit its upside potential.

As for the U.S. dollar, it continues to face challenges attracting buyers due to concerns over potential interference with the Federal Reserve's independence.

President Trump has criticized Jerome Powell for being slow to lower rates, and the U.S. Treasury Secretary recently stated that a new Fed Chair could be appointed by the end of the year or early next year. Key U.S. macroeconomic releases — including jobless claims, PMIs, and new home sales — could influence dollar dynamics later today. In addition, the European Central Bank's policy decision may cause market volatility and drive demand for safe-haven assets, which would provide additional support to the USD/JPY pair.

From a technical standpoint, an intraday break below the 100-period EMA and the key 146.00 level may act as an important bearish signal. However, oscillators on the daily chart have not yet begun to show a negative trend, urging caution among sellers.

On the other hand, a breakout above the 100-period EMA and sustained strength around the 146.57 level could lift the USD/JPY pair toward the 147.00 level. Beyond that, the next resistance is the previous day's high around 147.20. A break above this level could accelerate gains toward the interim target at 147.60 and pave the way for a move toward the psychological barrier at 148.00.