The exchange rate for USD/JPY is presently around 154.15, holding steady near its eight-month peaks. The couple’s path for November is influenced by differing monetary policies, Japan’s fiscal growth, and possible intervention risks. The dollar’s rise from 151.50 to 154.45 reflects a renewed confidence in the U.S. economy, especially after the data showed the eighth straight month of contraction at 48.7. Nonetheless, the strength in new orders and prices paid at 58 highlights ongoing concerns about inflation. The Federal Reserve continues to hold a firm position despite the recent 25-basis-point cut, which Chair Jerome Powell described as a “cautious recalibration,” rather than the start of an easing cycle. Markets have adjusted significantly — reports now indicates only 65% probability of a December rate cut, a decrease from 94% just a week prior, contributing to the U.S. Dollar Index maintaining a position close to 99.83.
The Japanese yen remains near multi-month lows as new Prime Minister Sanae Takaichi finalizes a significant 13.9 trillion yen ($92 billion) fiscal package designed to support households and tackle inflationary pressures. The stimulus, aimed at boosting consumption and reducing energy costs, lowers expectations for short-term rate increases at the Bank of Japan, which kept its benchmark rate steady at 0.50% for the fifth straight meeting. Even with Governor Kazuo Ueda’s confirmation of readiness to tighten monetary policy if wage growth picks up, market participants remain doubtful, estimating only a 50% chance of a 25-basis point hike in December. The widening gap in policy with the Fed continues to put pressure on the yen, leading traders to seize every chance for recovery. The inflation data from Tokyo has highlighted the challenges faced by the Bank of Japan. The city’s headline CPI rose to 2.8% in October, an increase from 2.5% in September. Furthermore, the measure that omits food and energy costs increased to 2.8%, suggesting ongoing fundamental price pressures. Ueda’s careful approach suggested the importance of waiting — he mentioned that the BoJ should “take a little longer” to evaluate the effects of U.S. tariffs and Japan’s sluggish wage discussions on consumption. The upcoming release of average cash earnings data on November 6 is significant; a rebound could revive hopes for a December hike, while weak wage growth would reinforce the BoJ’s dovish position. Markets understand that a lack of wage growth could hinder already weak demand, raising concerns about potential tightening risks.
The strength of the U.S. dollar comes from its relatively strong labor and manufacturing data. Given the recent ISM weakness, S&P Global Manufacturing PMI has improved to 52.5, indicating a stabilization in the sector. Treasury yields remain elevated — the 10-year yield is at 4.31%, supporting the dollar’s strength against currencies with lower yields. Fed officials Lisa Cook and Mary Daly highlighted that inflation remains above the target, supporting a “restrictive” policy stance, which stands in stark contrast to the BoJ’s strategy of exercising patience. The current divergence bolsters the USD/JPY rally, particularly as Japanese investors continue to favor U.S. Treasuries for their superior returns. USD/JPY has formed a tight consolidation triangle above 154.00, typically seen as a continuation pattern indicating the possibility of further increases. The pair’s RSI at 63 shows strong bullish momentum, and the MACD is nearing a bullish crossover on the daily chart. The upper boundary of the pattern is situated near 154.45, aligning with the high on October 30, followed by the peak on February 13 at 154.85, and a target for the 127.2% Fibonacci extension at 155.30. Immediate supports are set at 153.65 and within the range of 153.00–153.25, where previous resistance has shifted into demand. A notable decline beneath 152.20 would suggest the first bearish shift since mid-October. Nevertheless, the momentum framework continues to favor retests at the 155 level before any significant correction takes place.
The likelihood of verbal intervention is on the rise. The Ministry of Finance has voiced persistent worries about “disorderly yen moves,” which have traditionally signaled a potential for direct market intervention. Experts anticipate that the 155–160 range will serve as the key intervention point, consistent with previous efforts that cost Tokyo over 9 trillion yen ($60 billion) in 2022. Japan’s new fiscal stimulus showcases a blend of contrasting forces. Subsidies aim to assist households; however, they also raise expectations for more government bond issuance, which subsequently reduces sentiment towards the yen as yields remain limited by the Bank of Japan’s yield-curve control. Simultaneously, a falling yen results in higher expenses for imports, particularly in the energy and food industries. Oil prices are currently around $61.20 for WTI and about $65.00 for Brent. The increase in oil prices is resulting in higher import costs, which subsequently intensifies inflationary pressures, forcing the Bank of Japan to carefully manage the fine line between upholding credibility and promoting growth. Beyond Japan, global financial patterns support the dollar. The European Central Bank and Bank of England have taken a more cautious approach due to slowing growth, while the Federal Reserve remains focused on controlling inflation.
The week ahead holds important drivers. The U.S. ISM Services PMI and ADP Employment Change are poised to impact forecasts for the December Fed meeting, while Japan’s Jibun Bank Manufacturing PMI and BoJ minutes could offer clues regarding policy directions. A strong U.S. PMI rebound above 50 could push USD/JPY towards 155, while weak wage growth in Japan might delay BoJ tightening until 2026. Conversely, strong earnings from Japan could boost demand for the yen, possibly resulting in a pullback towards the 152.50–153.00 range. Market positioning demonstrates strength despite slight dollar fatigue after the ISM report. The DXY’s intraday drop from 99.99 to 99.83 remained above key support levels, suggesting limited downside pressure. Taking into account technical strength, macro divergence, and Japan’s fiscal stance, USD/JPY maintains a BUY bias, with short-term momentum aimed at 155.00–155.30 unless intervention takes place.