The USD/JPY pair is currently positioned at 156.54, experiencing a minor decline following its recent peak of 157.89, which marked a high not seen in nearly ten months. The decrease occurred following new intervention warnings from Japan’s Ministry of Finance, prompting investors to reduce their long positions. Despite this brief correction, the pair continues to show strong upward momentum and is poised for its second consecutive weekly gain. Tokyo’s verbal warnings indicate that authorities are uneasy with the current rate of yen depreciation, especially as the pair approaches levels that have historically prompted direct government intervention. Despite a slight increase in the Japanese Yen, the overall trend continues to favor the U.S. Dollar, driven by yield differentials and robust U.S. macroeconomic indicators. The USD/JPY framework continues to exhibit a bullish trend, provided that prices stay above 154.30 (21-day SMA) and 151.60 (50-day SMA). A daily close exceeding 158.00 would pave the way to 160.00, a threshold that traders are closely observing due to potential official intervention risks. The Federal Reserve’s measured approach stands in stark contrast to the Bank of Japan’s extremely accommodative policy. The most recent U.S. Nonfarm Payrolls report indicated an addition of 119,000 jobs in September, exceeding the anticipated figure of 55,000. The slight increase in the unemployment rate to 4.4% underscores the robustness of the U.S. labor market, leading traders to scale back expectations for a rate cut in December.
Conversely, Japan’s Q3 GDP experienced a contraction due to declining exports, which has lowered expectations for imminent tightening by the Bank of Japan. The Bank of Japan persists in its use of yield curve control, as the U.S. 10-year Treasury yield hovers around 4.45%, resulting in a significant policy divergence. This divergence continues to attract capital into dollar assets, maintaining demand for USD/JPY despite Japanese authorities expressing concerns over yen weakness. BoJ Governor Kazuo Ueda recognized that the depreciation of the yen is contributing to import-driven inflation, leading to speculation that policymakers might consider a shift away from negative interest rates in early 2026. Nonetheless, the most recent October CPI figures from Japan indicate headline inflation at 3.0% year-over-year and core inflation at 3.1%, which have not prompted a significant shift in policy. The government’s new ¥21.3 trillion stimulus package, which comprises ¥17.7 trillion in spending and ¥2.7 trillion in tax cuts, highlights Tokyo’s inclination towards fiscal strategies rather than monetary tightening, thereby dampening the yen’s short-term recovery prospects. The most recent trade figures highlighted the vulnerability of Japan’s economy. In October, exports experienced a year-over-year increase of 3.6%, a deceleration from the 4.2% growth observed in September. Notably, exports to the U.S. declined by 3.1%, whereas shipments to China saw a rise of 2.1%. Imports increased by a mere 0.7% year-over-year, a significant decline from the previous 3.3%, indicating a downturn in domestic demand and elevated import expenses due to yen depreciation.
The depreciation of the yen has led to an increase in the cost of imported goods, intensifying the pressure on household finances and compelling the Bank of Japan to navigate the delicate balance between fostering economic growth and controlling inflation. While the government’s stimulus is designed to mitigate these impacts, increasing import inflation maintains a level of caution among policymakers regarding sudden rate normalization. In the U.S., the S&P Global Services PMI is anticipated to be 54.6 for November, slightly lower than October’s 54.8, indicating continued growth in the leading service sector. The Federal Reserve continues to prioritize the ongoing nature of inflation, as several FOMC members, such as John Williams and Philip Jefferson, stress the importance of exercising patience prior to any rate reductions. These observations indicate a robust dollar, maintaining the USD/JPY at high levels despite speculation of intervention. The U.S. Dollar Index continues to hold above 106.40, maintaining its upward trajectory against key counterparts. Market participants expect that a robust U.S. services sector and persistent inflation may drive USD/JPY past 158.00, especially if the BoJ continues its accommodative approach into the end of the year.
From a technical standpoint, USD/JPY appears to be experiencing slight fatigue following the rise to 157.89, as momentum indicators suggest a phase of consolidation. The Relative Strength Index (RSI) declined from 70 to 66, indicating a reduction in momentum while not suggesting a reversal. The pair continues to trade significantly above key moving averages, sustaining a positive trend. Current resistance is positioned around 158.00, with additional upward movement possible towards 160.00 should bullish momentum continue. On the downside, initial support is observed at 156.00, with subsequent support at 154.30, aligning with the 21-day SMA. The long-term framework remains solid as long as the price holds above 153.00, which is the 200-day SMA. The increasing likelihood of action from Japan’s Finance Ministry, under the leadership of Satsuki Katayama, is serving as a significant psychological hurdle for traders. The ministry confirmed its preparedness to address “excessive currency volatility,” which contributed to limiting gains around the 158.00 level. Traders remember that past interventions in 2022 resulted in only short-lived recoveries for the yen, as underlying policy discrepancies came back into play. Prime Minister Sanae Takaichi maintains her advocacy for fiscal expansion, highlighting the importance of domestic stimulus to counteract external challenges. The interplay of expansive fiscal policy and a continuing accommodative stance from the BoJ sets the stage for ongoing yen depreciation through early 2026, barring any sustained and coordinated intervention with U.S. policymakers.
Speculative movements continue to be significantly biased in favor of the dollar. CFTC data indicates a 12% week-over-week increase in net long USD positions against the yen, suggesting that traders anticipate ongoing appreciation unless the BoJ adopts a more hawkish stance. The USD/JPY has experienced a 4.2% increase in October, indicating the market’s confidence in the dollar’s strength compared to the yen’s inherent weaknesses. If USD/JPY maintains its position above 156.00, a revisit to the 158.00–160.00 range seems probable, supported by robust U.S. PMI data and persistent yield divergence. On the other hand, a decline beneath 154.00 would suggest selling pressure influenced by intervention, potentially aiming for 152.50 prior to a resurgence in accumulation. Although short-term fluctuations may continue amid concerns over intervention, the outlook for the medium term is still positive. The ongoing delay in rate hikes by the BoJ, coupled with the Federal Reserve’s commitment to a restrictive policy stance, suggests that the USD/JPY pair is likely to remain supported within a range of 155–160. The USD/JPY maintains a bullish structure, underpinned by differing monetary policies, strong U.S. economic indicators, and ongoing investments in dollar-denominated assets. Intervention risks could decelerate the trend, yet they are unlikely to reverse it. The current technical analysis indicates a bullish sentiment for prices above 155.00, suggesting a possible rise towards the 159.50–160.00 range by the end of the year. The present assessment indicates a short-term Buy, a medium-term Hold, and a long-term Buy, highlighting the strength of the dollar and the weakness of the yen until the Bank of Japan indicates a clear change in its policy direction.