The USD/JPY pair is experiencing notable downward pressure, currently trading at approximately 151.04, reflecting a decline of 0.52% after its inability to maintain levels above the 151.40 resistance. The U.S. Dollar’s recovery from the 150.50 lows has encountered a halt due to escalating geopolitical tensions between Washington and Beijing, leading to a widespread weakening of the Greenback. While the Yen is typically viewed as a safe-haven asset, its rebound is constrained by ongoing political instability in Japan. The dissolution of the ruling LDP–Komeito coalition has created uncertainty for new Prime Minister Sanae Takaichi’s agenda. The market currently expects a more significant examination of the 150.20–150.00 support zone, with potential downside risk extending toward 149.50 should risk-off sentiment escalate.
The Dollar Index has halted its upward trajectory following a multi-week surge that propelled various dollar pairs to their six-month peaks. Overbought momentum indicators—especially the RSI on the daily chart—exhibit evident signs of fatigue, pulling back from highs last observed in December 2024. The DXY is currently in a consolidation phase around the 99.50–100.20 range, which is identified as a significant resistance zone. Meanwhile, support is positioned near 98.30, corresponding to the 0.382 Fibonacci retracement level of the trendline from May to September. This structure indicates that the Dollar’s strength might be approaching its peak, thereby raising the likelihood of short-term pullbacks in major pairs such as USD/JPY. In this scenario, USD/JPY’s consistent inability to surpass the 151.40 resistance highlights diminishing bullish sentiment. The Relative Strength Index is currently positioned beneath the neutral 50 threshold on the 4-hour chart, and the MACD histogram has shown signs of flattening, indicating a decrease in momentum. Market participants anticipate possible short-term recoveries; however, they foresee these movements being limited beneath 151.55. A significant breach above this threshold is required to overturn the prevailing bearish sentiment.
Strategists assess the present price structure as the initial phase of a range-trading environment between 149.50 and 153.00, emphasizing limited volatility following several months of pronounced directional shifts. On the hourly chart, a lower high formation has emerged near 151.25, reinforcing the perspective that the near-term bias remains on the downside. The current pivot points are 151.40 (resistance) and 150.20 (support). A consistent decline beneath 150.20 may reveal support levels at 149.90 and 149.50, delineating the lower boundary of the expected trading range. Conversely, a decisive break above 151.55 could reinstate bullish momentum, aiming for 151.90, and subsequently 152.60, where the pair faced significant selling pressure earlier this week. The price structure continues to reflect the USDCAD trendline setup, with both pairs exhibiting extended bullish momentum and comparable pullback patterns, indicating exhaustion rather than new strength.
Increasing tensions between the U.S. and China have rekindled global risk aversion, reducing investor interest in the Dollar and leading to slight inflows into safe-haven assets like the Yen and Gold. However, the Yen’s response has been subdued due to Japan’s internal political uncertainty and the Bank of Japan’s prudent approach to tightening. With the BoJ’s Tamura set to address the market later this week, there is a prevailing skepticism regarding any potential hawkish pivot. Conversely, the Federal Reserve maintains a dovish stance, with Chair Jerome Powell indicating a willingness to prolong the rate-hold period in light of decelerating growth. The yield spread between U.S. 10-year Treasuries (4.17%) and Japanese Government Bonds (0.78%) continues to be significant, providing a solid structural bullish foundation for USD/JPY, despite short-term traders anticipating a corrective decline. The pair’s response to macroeconomic indicators, such as U.S. business inventories, housing statistics, and Federal Reserve commentary, will dictate whether it can sustain levels above the 150 mark as we approach next week’s trading sessions.