USD/JPY has settled near the top of its daily range, trading between 148.41 and 149.28, supported by rising U.S. yields and solid economic data. Speculative accounts have continued to build long dollar positions following the break above 147, as expectations for Fed rate cuts diminish amid the strength of U.S. economic indicators. A post-U.S. election risk rally is likely to further boost USD/JPY, as the removal of electoral uncertainty could spur risk-taking in the final months of the year. However, the yen’s decline is being closely watched by Japanese officials, who are cautious about encouraging a carry trade that could weigh on consumer sentiment and Japanese importers.
Technically, USD/JPY is testing key resistance near the top of the weekly Ichimoku cloud at 149.08, a critical level that could determine the pair’s next move. If the pair breaks above this cloud, further resistance is seen at the weekly peak of 149.58 and the psychological 150.00 mark, where significant options activity is clustered. On the downside, support levels are positioned at the October 8 doji close of 148.20, followed by the 9-day EMA at 147.67 and the October 2 high at 146.52. With the pair’s 20-day rolling correlation with the DXY index near its highest level of the year, USD/JPY remains heavily influenced by movements in the U.S. dollar.
Looking ahead, the yen’s trajectory will hinge on upcoming data and policy developments, with Japan’s CPI report and BOJ Deputy Governor Ryozo Himino’s remarks in focus. While global stimulus and U.S. earnings continue to support risk-taking, the BOJ’s potential shift toward tightening, hinted at by Himino, adds a layer of uncertainty. Should CPI data point to economic growth, it could serve as a messaging opportunity for Japanese officials to slow the yen’s slide. Market participants will also watch for any signals of changing policy from the BOJ or hints of intervention if the yen continues to weaken toward 150.00, a level that could trigger additional volatility.