USD/JPY declined to approximately 152.85 in late Friday trading, following a rejection near 153.50, resulting in a 0.6% loss for the week as investors adopted a more cautious stance ahead of the U.S. consumer sentiment data. The pair initially experienced an uptick as disappointing Japanese household spending figures led to a depreciation of the yen; however, a resurgence of dollar weakness subsequently negated those gains. Market participants are currently assessing the uncertainty surrounding the Bank of Japan, the potential for verbal intervention from Tokyo, and the weakening macroeconomic conditions in the U.S. — all contributing to significant intraday fluctuations within the 150–154 range of the pair. In September, Japan’s household spending increased by only 1.8% compared to the previous year, falling short of the anticipated 2.5% and declining from the 2.3% growth observed in August. The subdued reading suggests that private consumption, accounting for 55% of Japan’s GDP, continues to exhibit fragility. The data indicates that inflationary momentum is stalling, as evidenced by moderating wage growth — nominal pay increased by 1.9% year-over-year, while real wages experienced a decline of 1.4%. Japan’s core-core CPI has decreased from 3.3% to 3.0%, suggesting a deceleration in consumer price growth. The outcome: markets significantly decreased their expectations for a December BoJ rate hike, strengthening a more dovish policy perspective and pushing USD/JPY above 152.90 during early trading in Asia. Nonetheless, the lackluster consumption data has raised apprehensions regarding Japan’s domestic demand, dampening investor confidence in the potential recovery of the yen, even in light of intervention alerts.
Japanese Prime Minister Sanae Takaichi stated that “price stability coupled with sustainable wage gains has yet to be achieved,” a remark seen as an indication for ongoing monetary support. Finance Minister Katayama, however, issued a stark warning against “excessive currency volatility” as the yen approaches levels that prompted interventions in 2022 and 2024. The verbal pushback provided a temporary boost to the yen; however, this effect was fleeting, underscoring the minimal influence of rhetoric in the absence of concrete market intervention. It is projected that Tokyo may take action should the USD/JPY pair revisit the 154.50–155.00 range, a threshold that is under careful observation by both the Bank of Japan and the Ministry of Finance. Across the Pacific, the U.S. Dollar Index experienced a decline as economic data showed signs of weakening. The University of Michigan Consumer Sentiment Index is projected to decline for the fourth consecutive month to 53.2, a decrease from 53.6, indicating an increase in pessimism regarding income and inflation. Currently, the extended U.S. government shutdown, which has reached day 38, is causing delays in essential labor data, thereby increasing volatility in the currency and bond markets. Traders turned to private datasets such as ADP and Challenger, revealing that job cuts surged from 54,064 in September to 153,074 in October — marking the highest level since early 2024. The recent surge in layoffs has significantly heightened the likelihood of a rate cut by the Fed in December.
From a technical perspective, USD/JPY is currently confined within a narrowing wedge pattern. The 4-hour chart for the pair indicates immediate support in the range of 152.00–152.50, with a more robust demand level at 151.50, which corresponds to the rebound zone observed on October 28. Deeper supports are identified near 150.00 and 148.50, which correspond to previous multi-month pivot ranges. On the upside, resistance is positioned at 153.40 (4H MA50), followed by the range of 154.00–154.50, with a long-term ceiling located around 155.00–156.00. Momentum indicators indicate an early bearish divergence: the RSI has pulled back from overbought levels, and the MACD histogram is showing signs of flattening, suggesting a potential exhaustion following October’s 1,600-pip rally. Market participants are closely monitoring for a daily close beneath 152.80, as this could initiate a corrective decline towards 151.00 prior to the subsequent bullish endeavor. Even with temporary setbacks, the core yield differential remains a strong support for USD/JPY. Japan’s 10-year government bond yield is currently constrained around 0.50%, whereas the U.S. 10-year Treasury is positioned above 4.0%, resulting in a spread of approximately 350 basis points. This gap continues to represent a significant global carry trade opportunity, maintaining dollar demand during each decline. The selection of fiscal dove Sanae Takaichi as prime minister strengthens market anticipations that the Bank of Japan’s ultra-loose policies will continue through 2026.
Provided that Tokyo avoids direct intervention, it is anticipated that foreign funds will continue to hold long-dollar positions against the yen, particularly in light of the global decline in risk sentiment and the sluggish trends in Japanese consumption. Recent fluctuations in the equity market have created a surge in short-term demand for the yen. As S&P 500 and Nasdaq futures decline by more than 0.7% this week, there has been a noticeable shift by investors towards conventional safe havens. Nonetheless, the yen’s status as a safe haven is somewhat diminished by the vulnerabilities within Japan’s domestic economy. The volatility of USD/JPY has surged to an annualized rate of 9.3%, marking its peak since May, indicating a swift unwinding of both long and short positions. Hedge funds monitoring Japanese intervention have observed a rise in yen call option purchases, indicating a belief in at least one response from the BoJ before the end of the year. Meanwhile, macro funds have continued to hold long-dollar positions as December approaches. A bearish scenario may materialize should the BoJ take on a more hawkish stance or if verbal interventions transition into actual yen purchases, which could lead USD/JPY to decline to 151.00 or lower. Subpar U.S. economic indicators alongside accommodating remarks from the Federal Reserve would enhance that shift.
On the other hand, a bullish breakout could be likely if the resilience of the U.S. economy continues, consumer sentiment holds steady above 55, and the BoJ indicates a willingness to maintain its current stance on normalization. In that scenario, the pair may revisit 154.50, the high from November 4, and could aim for 156.00 if Treasury yields experience a rebound. Recommendation: HOLD — Anticipating a Short-Term Correction Probable, Long-Term Outlook Remains Optimistic. The current dynamics indicate that USD/JPY is experiencing a consolidation phase within the range of 151.50 to 154.50. The diminishing momentum of the dollar, a less favorable U.S. jobs outlook, and declining consumer spending in Japan all suggest potential short-term volatility. However, the long-term upward trend persists, supported by yield spreads that favor the U.S. The potential for verbal or actual intervention around 155.00 continues to pose a limitation, however, the ongoing divergence between the Fed and BoJ maintains structural support for the dollar.