The USD/JPY pair continued its strong ascent into the first session of November, finishing Friday close to 154.00, marking its highest point since March, as U.S. yields rose sharply after Jerome Powell reiterated that rate cuts are “far from guaranteed.” The dollar’s rally was bolstered by the current U.S. government shutdown, which postponed essential labor market data, compelling traders to depend on private indicators like ADP employment and ISM services PMI. The recent developments have increased volatility, causing the U.S. 10-year Treasury yield to approach 4.75%, while the 2-year yield has stabilized around 4.98%, thereby maintaining the dollar’s strength against the yen. The relationship between USD/JPY and U.S. bond yields has intensified significantly, as evidenced by a rolling five-day coefficient reaching 0.93—among the highest levels observed this year. This indicates that the movements of the currency pair have diverged from equity risk sentiment, aligning closely with Treasury performance almost precisely.
In the wake of Powell’s FOMC remarks, traders have adjusted the likelihood of a December rate cut to under 25%, a significant decrease from the nearly 60% observed two weeks ago. The Federal Reserve’s quantitative tightening is anticipated to decelerate by early December, as maturities from the Fed’s holdings will be reinvested into short-term Treasuries. This move is likely to further anchor front-end yields and maintain pressure on the yen. The Treasury Department’s latest quarterly refunding projection, estimating $590 billion in Q4 borrowing, has intensified concerns regarding debt supply, further reinforcing the elevation of yields. The concentration of U.S. debt issuance on short-term maturities has led to a narrowing of yield spreads between 2-year and 10-year Treasuries to -24 basis points, which enhances the attractiveness of the dollar.
With USD/JPY trading above the 152.00 psychological threshold that prompted intervention in 2022, Tokyo’s financial authorities are clearly expressing concern. Finance Minister Satsuki Katayama cautioned that the yen’s “very one-sided and rapid moves” are under observation with “a high sense of urgency.” This explicit language reflects the rhetoric employed just prior to Japan’s previous intervention when the pair approached 151.95, indicating that policymakers are currently vigilant. Japan’s 10-year JGB yield remains constrained by the Bank of Japan’s 1.0% upper limit, which significantly restricts the central bank’s ability to respond to U.S. rate differentials. The expanding yield differential—currently surpassing 380 basis points between U.S. 10-year Treasuries and Japanese JGBs—remains a significant factor in dampening yen demand. The Tokyo CPI print for October, which increased by 2.9% year-over-year, intensifies the pressure on the BOJ to contemplate policy normalization by December.
From a technical perspective, USD/JPY is clearly in a strong uptrend, consistently staying above its 200-day moving average (148.60) and 50-day average (150.40). The breakout above 153.28 last week has established a new structural base, which is now functioning as a key support level. Resistance levels are identified at 154.45, 154.80, 156.50, and 158.88, indicating potential upside targets if the pair maintains its momentum. However, the RSI (14) indicates a slight bearish divergence—prices are reaching new highs, while momentum is stabilizing around 68. This indicates a possible fatigue in the vicinity of the 154.00–154.80 range. The MACD continues to exhibit a bullish crossover signal, indicating a persistent buying bias. A brief pullback to the 153.00–153.20 range is a possibility, where the uptrend line established on October 2 offers a secondary accumulation area for those looking to buy on dips.
In addition to the yen, Powell’s remarks following the FOMC meeting have sparked a widespread rally in the dollar. The U.S. Dollar Index concluded Friday at approximately 99.80, reflecting a 0.6% increase for the week, thereby achieving its second consecutive weekly gain. The EUR/USD declined to 1.1550, while GBP/USD dropped below 1.2500, highlighting the strength of the USD. The current market is reflecting expectations of merely three 25bps rate cuts in 2026, reinforcing a yield narrative that supports dollar bulls universally. Momentum traders are decisively in control, and provided that the pair remains above 153.20, the trajectory of least resistance continues to trend upward. With Powell’s hawkish guidance reinforcing yield dominance, and Japanese policymakers still constrained by YCC limits, USD/JPY sustains a robust bullish structure as we approach November. Short-term corrections are anticipated near 154.00; however, the overarching trend continues to point upward toward the 155.50–156.00 range, provided that the 153.00 support level remains intact.