The USD/JPY pair is currently positioned around 154.00, consolidating slightly beneath the significant resistance zone of 154.50–155.00, as market participants analyze the recent weak U.S. labor data alongside the Bank of Japan’s prudent policy approach. The dollar initially surged to a new nine-month peak at 154.50, but then pulled back as weaker U.S. employment figures bolstered expectations for a Federal Reserve rate cut in December. Reports indicates that markets currently assign a 70% probability of a 25-basis-point cut next month, an increase from 62% the previous day. The U.S. Dollar Index has decreased to 99.40, reflecting its fifth consecutive day of decline. The Japanese Yen is experiencing ongoing pressure as policymakers persist in their reluctance to implement additional rate hikes. Minutes from the latest BoJ meeting indicated a lack of urgency to take action, as officials highlighted the necessity for additional economic data prior to contemplating any further measures. Japan’s Economy Minister Yoshitaka Kiuchi cautioned that the depreciating yen, currently around 154 per dollar, is increasing import expenses and putting pressure on household finances. The government is set to implement a new stimulus package by November 21, intended to alleviate inflationary pressures and stimulate domestic demand.
In a move that reinforces dovish sentiment, Takuji Aida warned that a rate hike in December would be “risky.” He indicated that a more viable approach to tightening might materialize in early 2026, contingent upon improvements in growth conditions. This solidified market expectations that monetary policy will continue to be exceptionally accommodative through the end of the year. Consequently, market participants persist in liquidating the yen during price increases, maintaining a strong demand for USD/JPY close to the upper limit of its extended trading range. The U.S. labor market is showing signs of weakening, which heightens the likelihood that the Federal Reserve could start easing measures earlier than previously expected. According to data, the U.S. experienced a reduction of an average of 11,250 private-sector jobs in the four weeks concluding on October 25, a decrease from the prior figure of 14,250. The recent weakness, alongside a five-day decline in the dollar index, has led to a stabilization of bond yields around 4.35% on the 10-year Treasury, indicating a moderation in inflation expectations.
The ISM Services Index exceeded expectations, remaining above the neutral mark of 50, whereas the manufacturing index continued to languish in contraction territory. This divergence underscores a bifurcated U.S. economy—robust in services while experiencing a deceleration in goods production. If this trend continues, markets may anticipate not only one but two rate reductions in 2026, heightening the downside risk for the dollar in the medium term. From a technical perspective, USD/JPY is currently confined within a narrow range, exhibiting robust support around 151.92–151.95 and solid resistance at 154.82–155.03. The resistance zone is defined by the 78.6% Fibonacci retracement of the yearly range, whereas the long-term support is indicated by the 200-day moving average at 149.32. The recent consolidation of the pair indicates a possible breakout pattern. Should the price close firmly above 155.00, momentum may propel the pair towards 156.50 and subsequently 157.70, which align with the 100% Fibonacci extension of the April advance.
The bullish bias is supported by momentum indicators. The RSI is positioned around 63, indicating moderate strength without suggesting overbought conditions, and the MACD continues to show a positive trend. Nonetheless, a weekly close below 151.90 may initiate a correction towards the range of 149.30–148.90, which represents the lower boundary of the multi-month uptrend. Market participants are concentrating on the November opening range, which currently serves as the technical pivot that will determine the next significant movement. As USD/JPY approaches the 155 level, discussions regarding potential Japanese intervention are reigniting. Officials in Tokyo have previously stepped in near these levels—most notably in late 2024—after the pair touched 158.00, triggering a temporary 3% reversal. However, it is observed that without coordinated action between the BoJ and the Ministry of Finance, such interventions yield only temporary relief. The most recent verified intervention involved Japan selling approximately ¥6.3 trillion (around $41 billion), yet the impact diminished within a matter of weeks. This time, the government encounters a more intricate landscape. Given that inflation is exceeding 2.5%, coupled with rising energy costs and a deceleration in consumer spending, policymakers are cautious about implementing aggressive strategies that could potentially disrupt market stability. The most recent data from the Ministry of Finance reveals a notable uptick in verbal intervention, as daily yen references from officials have surged by 27% month-over-month. This development suggests that Tokyo is positioning the markets for possible measures should the yen fall below 155.50.
The increasing disparity between U.S. and Japanese yields continues to be the primary factor fueling the sustained strength of USD/JPY. The U.S. 10-year yield at approximately 4.35% stands in stark contrast to Japan’s 0.9% benchmark, resulting in one of the most significant real-rate spreads observed in decades. Even a modest 25-basis-point Fed cut would still maintain a yield differential surpassing 3.25%, thereby bolstering demand for the dollar. Meanwhile, the BoJ’s ultra-loose framework, including its Yield Curve Control flexibility, continues to suppress Japanese yields despite modest inflation increases. Furthermore, global investors persist in their preference for dollar carry trades financed by low-yielding yen assets. CFTC positioning data indicates that net yen shorts have increased to ¥87,000 contracts, marking the highest level since April. Additionally, leveraged funds have raised their dollar exposure by 6.4% week-over-week. This speculative imbalance heightens volatility risk should intervention trigger short-covering; however, it currently supports the pair’s upward bias. Although the U.S. government shutdown seems to be resolved, the resulting data gap has postponed important economic releases, compelling traders to depend significantly on remarks from Federal Reserve officials. This week, a sequence of statements from key policymakers, notably Christopher Waller, Lisa Cook, and Michael Barr, is poised to influence market anticipations as we approach the FOMC meeting in December. The forthcoming fiscal stimulus package in Japan is designed to counteract the yen’s effect on real incomes, with the potential to inject ¥10–12 trillion in spending to support growth through the first quarter of 2026. The policy actions taken by both countries illustrate their differing economic objectives:
Japan aims to stabilize domestic demand, whereas the U.S. is concentrating on controlling disinflation while avoiding a recession. The outcome is a structural environment that maintains USD/JPY at elevated levels, where dips are shallow and swiftly purchased by institutional investors. The short-term outlook reveals distinct inflection points. A sustained close above 155.00 would indicate a bullish continuation toward 156.50 and potentially 158.00–159.00, signaling new cycle highs. Should the pair not surpass this threshold, a consolidation phase between 153.00 and 154.50 could prevail into mid-November. On the other hand, a close below 151.90 would negate the bullish structure, revealing 149.30 as the subsequent downside target. The direction of the pair will fundamentally hinge on the timing decisions made by the Fed and BoJ—specifically, whether the U.S. implements a rate cut prior to Japan’s initial hike. Given the persistent inflation and Japan’s delayed policy response, the trend appears to be leaning towards an upward trajectory. Currently, USD/JPY is positioned at approximately 154.00, hovering just below significant resistance in a market characterized by policy divergence and technical tension. The pair’s ability to withstand weak U.S. data highlights ongoing yen weakness instead of indicating dollar strength. The trajectory of minimal opposition continues to trend upward, as the buy-the-dip mentality dominates above 151.90. In the absence of decisive intervention from Tokyo or a clear signal from the Fed regarding an accelerated easing cycle, USD/JPY is likely to experience a breakout targeting 156.50 and 157.70 in the near term. The outlook is positive, backed by yield spreads, momentum structure, and inherent yen weakness.