Track market-moving stories before they get noisy

As the trading week comes to an end, one of the most relevant developments in the FX market has been the renewed strength of the Japanese yen. This can be seen in the recent performance of USD/JPY, which has fallen nearly 1.0% over the last two trading sessions, highlighting a meaningful recovery in the Japanese currency against the U.S. dollar.

For now, the selling pressure observed around the pair is being driven primarily by the loss of momentum in U.S. Treasury yields. This has been reinforced by Japan's latest inflation data, released toward the end of the week, which has started to strengthen expectations of a potentially more aggressive Bank of Japan in the coming months. As a result, the yen has managed to recover part of the ground lost in previous months and, as long as these catalysts continue to support the Japanese currency, selling pressure around USD/JPY could remain relevant in the sessions ahead.

Is the Dollar Beginning to Lose Strength?
A loss of momentum around the U.S. dollar became increasingly evident throughout the week. Part of this dynamic has been driven by the moderation observed in 10-year U.S. Treasury yields, which temporarily moved below the 5.0% area.

This development is important because lower yields reduce part of the relative attractiveness of dollar-denominated investments. As a result, demand for the U.S. currency may also begin to soften in the short term.

The impact has already started to become visible in the behavior of the DXY, the index that measures the strength of the dollar against its main peers. In recent sessions, the index has retreated consistently, moving away from its yearly highs and currently trading near the 102-point area. This decline suggests that demand for the dollar has begun to moderate after several weeks of relatively solid strength, a dynamic that appears closely linked to the loss of momentum in the U.S. bond market.

Source: TradingEconomics

This behavior is particularly relevant because, as part of the relative advantage of holding dollar-denominated assets begins to fade, other currencies such as the yen have started to recover ground. In fact, the recent strength observed in the Japanese currency appears closely tied to this loss of relative attractiveness within U.S. financial markets.

As long as Treasury yields continue moving within a moderation phase, the yen could continue recovering part of the ground lost throughout much of 2026. Under this scenario, selling pressure around USD/JPY may remain an important factor influencing the pair in the short term.

Do Japan's Inflation Data Matter?
In addition to the weakness observed in the dollar, investors have also been paying close attention to Japan's latest inflation release. Annual inflation rose to 2.1%, reaching its highest level of 2026 and maintaining a relatively consistent upward trend over recent months.

This remains important because inflation is now developing slightly above the 2.0% target established by the Bank of Japan, a situation that could start generating greater concerns about inflationary pressures within the Japanese economy.

Source: TradingEconomics

The data have also started to influence monetary policy expectations. Only a few weeks ago, markets were pricing more than a 90% probability that the Bank of Japan would leave its policy rate unchanged at 1.25% during the October 28 meeting. However, by the end of the week that probability had fallen toward 80% area.

At the same time, expectations for the December meeting now imply close to a 60% probability that interest rates could rise to 1.50%.

Source: Centralbankwatch

This suggests markets are increasingly positioning for a more aggressive Bank of Japan over the coming months. Although Japanese rates remain relatively low compared to the current 4.0% reference rate in the United States, it is important to remember that Japan has maintained exceptionally low rates for decades.

For this reason, any gradual shift toward a more restrictive monetary policy stance could begin to alter investor perceptions regarding yen-denominated assets. If this process continues, the interest-rate differential between Japan and other major economies could gradually narrow, eventually becoming a meaningful catalyst for demand for the Japanese currency.

As a result, if the Bank of Japan continues moving toward a more aggressive stance than markets have been accustomed to over recent years, selling pressure around USD/JPY could remain an important theme even beyond the short term.

USD/JPY Technical Forecast

Source: StoneX, Tradingview

The bearish bias is becoming relevant once again: Although USD/JPY had recently entered a phase of short-term neutrality after partially breaking the bearish trendline developed over previous months, recent price action has once again given prominence to selling pressure. As a result, the broader bearish structure is regaining relevance within the daily chart. As long as price continues approaching key support zones, the long-standing bearish trendline could once again become the dominant technical structure during the weeks ahead.

 
MACD: The MACD histogram continues to trade slightly below the 0 neutral line, a reading that reflects weakening momentum within short-term moving averages. If this dynamic remains intact, it could continue supporting a more established bearish bias in the sessions ahead.

 
RSI: A similar picture can be observed in the RSI, whose line remains below the 50 neutral level. This suggests that selling momentum has started to regain traction and supports the possibility that the bearish bias could remain relevant in the short term.

 
Key Levels:

158.86 – Key Resistance: A level that aligns with the 200-period simple moving average and represents the most important upside barrier in the short term. A sustained move above this reference could significantly alter the current technical structure and open the door to a more consistent bullish trend over the coming weeks.

 
157.38 – Near-Term Barrier: A level that coincides with the base of the recent consolidation range and also develops near the 50-period simple moving average. This could become the main level to monitor in the event of short-term bullish corrections.

 
155.30 – Key Support: A support zone established during previous weeks that remains one of the most important downside barriers on the chart. Price action returning toward this level could restore the dominance of selling pressure and reinforce the relevance of the broader bearish trendline as the market's primary technical structure over the coming weeks.

 
Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

Key Highlights

USD/JPY failed to settle above 159.00 and dipped. It traded below a key bullish trend line with support at 158.00 on the 4-hour chart. GBP/USD could start a pullback from the 1.3420 resistance. Gold prices reacted to the downside and might even test $3,880. USD/JPY Technical Analysis The US Dollar failed to remain in a positive zone against the Japanese Yen. USD/JPY started a fresh decline below 158.00 and 157.50.

Looking at the 4-hour chart, the pair even traded below a key bullish trend line with support at 158.00. There was a close below 157.50 and the 100 simple moving average (red, 4-hour). Finally, the pair spiked below the 200 simple moving average (green, 4-hour).

It tested the 156.70 zone and started a consolidation phase. If there is a recovery wave, the pair could face resistance near the 50% Fib retracement level of the downward move from the 158.60 swing high to the 156.69 low.

The first major resistance might be near 158.00 and the 100 simple moving average (red, 4-hour). A close above 158.00 could start a steady increase. In the stated case, the pair might even surpass 158.60.

Conversely, the pair could see another decline. Immediate support could be 156.70. The first major support might be 156.25. A close below 156.25 might accelerate the decline. In the stated case, the pair might drop to 155.50. The main support might be close to 155.00.

Looking at Gold, the price failed to surpass the $4,220 resistance, dipped again, and might drop toward the $3,880 support.

Upcoming Key Economic Events:

Euro Zone Manufacturing PMI for Oct 2026 (Preliminary) – Forecast 52.8, versus 52.9 previous. Euro Zone Services PMI for Oct 2026 (Preliminary) – Forecast 52.8, versus 53.0 previous. US S&P Global Manufacturing PMI for Oct 2026 (Preliminary) – Forecast 55.6, versus 55.9 previous. US S&P Global Services PMI for Oct 2026 (Preliminary) – Forecast 57.9, versus 58.8 previous.

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Key Points:EUR/USD is mostly flat despite the strong sell-off in French debt markets. GBP/USD gains ground as traders react to UK inflation report. USD/JPY stays range-bound.

U.S. Dollar Is Mostly Flat Amid Lack Of Strong Catalysts

DXY 211026 4h Chart
U.S. Dollar Index is swinging between gains and losses as traders focus on dynamics of Treasury yields. The yield of 2-year Treasuries climbed towards the 4.79% level, while the yield of 10-year Treasuries pulled back below 5.11%. Bond traders are not ready for big moves, and it looks that the market is already waiting for Fed decision, which will be released next week.

The nearest support level for U.S. Dollar Index is located in the 101.50 – 101.65 range. A move below the 101.50 level will open the way to the test of the next support at 100.85 – 101.00.

EUR/USD Stays Range-Bound Despite Sell-Off In French Debt Markets

EUR/USD 211026 4h Chart
EUR/USD is mostly flat as traders focus on the situation in French debt markets. The yield of 10-year French government bonds climbed above the psychologically important 5.00% level. Traders are worried that French protests will force the country to boost spending, which would push yields even higher.

In case EUR/USD manages to settle above the resistance at 1.1250 – 1.1265, it will head towards the next resistance level at 1.1350 – 1.1365. On the support side, a move below the 50 MA at 1.1206 will open the way to the test of the next support at 1.1175 – 1.1190.

GBP/USD Gains Ground As UK Inflation Rate Exceeds Estimates

GBP/USD 211026 4h Chart
GBP/USD is moving higher as traders focus on inflation data from the UK. Inflation Rate increased from 3.1% in August to 3.5% in September, compared to analyst forecast of 3.4%. Core Inflation Rate grew from 2.6% to 2.8%, while analysts expected that it would increase to 2.7%.

Currently, GBP/USD is trying to settle above the resistance level at 1.3385 – 1.3400. In case this attempt is successful, GBP/USD will head towards the next resistance level, which is located in the 1.3485 – 1.3500 range. I’d note that RSI is in the overbought territory, so the risks of a pullback are rising.

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USD/CAD Failed To Climb Above 1.4080

USD/CAD 211026 4h Chart
USD/CAD is swinging between gains and losses as traders focus on dynamics of commodity markets. Gold is mostly flat in today’s trading session, while silver pulled back by -0.8%. Oil prices are losing some ground as traders wait for news from the Middle East. Other commodity-related currencies are moving higher in today’s trading session.

USD/CAD has recently made an attempt to settle above the resistance level at 1.4070 – 1.4085 but failed to develop sufficient upside momentum and pulled back. In case USD/CAD climbs above the 1.4085 level, it will head towards the next resistance, which is located in the 1.4135 – 1.4150 range.

USD/JPY Remains Stuck In A Tight Range

USD/JPY 211026 4h Chart
USD/JPY remains stuck near key resistance at 158.00 – 158.50 as traders are not ready for big moves ahead of next week’s central bank meetings. Fed and BoJ will release their interest rate decisions next week.

From the technical point of view, USD/JPY stays range-bound. Most likely, USD/JPY will need additional catalysts to get out of the current trading range. It remains to be seen whether traders will be ready to react to economic reports or prefer to wait for Fed decision, which will be released on October 28.

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About the Author

Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

USD/JPY Talking Points:
USD/JPY volatility has quieted over the past month following the steep sell-off from the 160.00 handle.
Since then, 159.00 has functioned as resistance but bulls haven’t been too deterred, continually showing up after pullbacks at higher-lows.
This sets the stage for tension, with that 159 level as resistance and the 160 level the bigger spot sitting overhead.
While the FX fireworks have been elsewhere of late, USD/JPY remains structurally clean, and as I looked at in last week’s webinar I think the pair is one of the more attractive backdrops for items of USD-strength. That said, the market is not without its own drama as the 160.00 level that evoked comments from both Katayama in Japan and Bessent in the US sits just above current resistance at the 159.00 handle.

That 159.00 level had a bit of verbal defense, as well, but the reaction to that wasn’t nearly as stark as what had showed a month earlier when USD/JPY fell by more than 700 pips after venturing above the 160.00 handle. And, of course, the 164.00 level looms large as this was the spot that was actually defended by a real intervention, rather than just threats like the 160 and then 159 levels.

But perhaps more to the point, talk is cheap, and fundamentals remain tilted to the long side of the pair as US inflation is higher than that of Japan and even with the BoJ talking up rate hikes, the Fed has a harder road ahead given that expectation for continued high inflation.

This is why, despite the best efforts from economic policymakers on both sides of the pair, USD/JPY has tended towards bullish structure, such as we see today. From the daily chart you can see multiple underside wicks, each reflecting a response from buyers to pullbacks. We had one such scenario last Thursday, with bulls responding just above the 157.50 level, and that gave a higher-low on Friday and, again, this Monday.

USD/JPY Daily Chart
Chart prepared by James Stanley; data derived from Tradingview

USD/JPY Longer-Term
At this point we’ve seen action at 164 but only posturing below, and given how long buyers have hung around, this could spell for an eventual test until some type of action takes place from policymakers. I’d still be careful chasing breakouts over the 160 handle, but at this stage, pullbacks and a push up to 159 could remain attractive, given that buyers have shown up in the manner that they have.

If a breakout at 160 happens, price can move fast, because there’s likely a litany of stops sitting above the big figure, and if those stops get triggered that’s a wave of demand that can create a fast move-higher. This would be similar to the April of 2024 episode, when the 151.95 level was finally broken, after which we had a direct run up to the 160.00 level.

USD/JPY Weekly Chart
Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro

The Japanese Yen (JPY) is down against its major currency peers at the start of the week. In the European trade, the US Dollar (USD) is up 0.17% at around 158.25 against the Asia-Pacific currency.

Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD0.16%-0.05%0.11%-0.42%-0.58%-0.27%0.12%EUR-0.16%-0.21%-0.02%-0.55%-0.74%-0.43%-0.02%GBP0.05%0.21%0.17%-0.36%-0.54%-0.24%0.18%JPY-0.11%0.02%-0.17%-0.51%-0.77%-0.36%0.05%CAD0.42%0.55%0.36%0.51%-0.14%0.16%0.56%AUD0.58%0.74%0.54%0.77%0.14%0.31%0.72%NZD0.27%0.43%0.24%0.36%-0.16%-0.31%0.41%CHF-0.12%0.02%-0.18%-0.05%-0.56%-0.72%-0.41%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

The Japanese currency is under pressure even as Bank of Japan (BoJ) Governor Kazuo Ueda signals that the underlying inflation is close to the 2% target. However, Ueda stated that “anchoring core inflation near 2% growth more crucial.”

Ueda leans cautiously hawkish as inflation loop firms and JGB guidance stays vagueUeda scores 7/10 on FXS Speechtracker versus a 7.4/10 historic average, but the emphasis on “underlying inflation near 2%” and a positive wages–prices loop marks a mildly hawkish tilt for the YEN. The focus on demand-led inflation from robust global AI-related capex, tight domestic labor markets, and the warning that long-term rates could rise if the policy rate is not adjusted properly all support a gradual normalization bias that can underpin YEN yields.

At the same time, Ueda stresses that financial conditions remain accommodative, confirms no shift in the fundamental bond taper approach, and refuses to preannounce emergency JGB measures, which tempers the hawkish tone. For FX, the combination of firmer inflation dynamics and data-dependent rate guidance is modestly supportive for the YEN, but the lack of explicit tightening timelines and the pledge to stabilize the JGB market limit immediate upside and keep carry trades only cautiously challenged.

This week, investors will focus on National Consumer Price Index (CPI) data for September, which will be released on Friday.

Meanwhile, the US Dollar trades slightly higher as French fiscal concerns resurface. As of writing, 10-year French bond yields are up 0.56% to near 4.88% amid civil unrest in France. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% higher to near 101.90.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 158.20, holding the short-term Moving Average Exponential (20, close) at 157.87. The pair is inside the Symmetrical Triangle formation, reflecting broader indecisiveness among investors.

The Relative Strength Index (14) at 53.92 sits in neutral-positive territory, hinting that upside momentum is steady rather than stretched, leaving room for the pair to consolidate gains while staying supported by the underlying trend.

On the downside, initial support is reinforced by the 20-period exponential moving average near 157.87. A major action in the pair will likely only after a decisive break of the volatility contraction pattern on either side. The pair could slide to 156.00 if the formation breaks on the downside. Looking up, the pair would aim to revisit the 160.00 hurdle if it manages to break the immediate hurdle near 159.00.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

National CPI ex Fresh Food (YoY)
Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide excluding fresh food, whose prices often fluctuate depending on the weather. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

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Summary:

USD/JPY rate is stuck between 157.40 and 159.00, caught between high US bond yields and worries about Japanese currency intervention. This long period of consolidation suggests a cautious global risk outlook. Markets aren't strongly risk-on or risk-off, but waiting for clearer policy direction. For a sustained move to happen, new economic catalysts are needed. If the pair closes above 159.00, it would aim for 160.00. The USD/JPY currency pair spent much of October locked in a tight range, generally holding within 157.40 and 159.00.

This sideways action contrasts sharply with the year’s earlier, more volatile trends. It prompts questions about the factors currently stabilizing the pair and whether a decisive break is likely in the coming week.

What’s Keeping the Pair Contained? A few opposing forces are pulling at the pair. The substantial interest rate gap between the U.S. and Japan keeps propping up the dollar. Even with some recent shifts in policy outlooks, this rate difference remains wide enough to fuel carry trades, stopping the yen from gaining much ground.

At the same time, Japanese officials have shown they’re sensitive to the pair nearing 160. Warnings from financial leaders and the market’s memory of past interventions have reliably kept upward moves in check, especially around the top of the current range.

Japan’s Finance Minister said Tokyo and Washington are on the same page and ready to act quickly. This warning isn’t taken lightly. A prior coordinated U.S.-Japan intervention caused the yen to jump, reaching 155 after being above 163. About half of those gains later faded. Now, market players see 160 as a significant level. Sell orders are clustered around 158.20 and 158.35.

Support for the range’s bottom comes down to central bank policy timing. The interest rate difference between the Federal Reserve and the Bank of Japan (BoJ) remains quite large.

With U.S. 10-year Treasury yields staying high after stronger-than-expected inflation numbers, holding U.S. dollars offers a clear yield advantage through carry trades compared to the yen’s low yields. This yield difference helps cushion against sharp drops and maintains a solid floor around 157.40.

U.S. inflation data is high, yet that hasn’t changed market expectations much for an immediate Fed rate hike. Chances of an October increase are about 40% or less.

The BoJ, however, isn’t reportedly planning a rate change in October, even though markets see an 88-90% chance of a December hike. This situation holds back the dollar’s climb and gives the yen little reason to strengthen much right now.

Could We See A Breakout Next Week? A breakout of the 157.40-159.00 channel next week is possible, but it’d probably need a major fundamental event.

Upcoming U.S. producer prices and speeches, including one from Fed Chair Kevin Warsh, might cause some short-term price swings. These usually reverse quickly, though. There aren’t any big economic events scheduled for next week that look like they’ll really move the market.

Without any big triggers, the market will probably just keep moving within its current range. Traders are focusing on range-bound strategies ahead of the central bank meetings later in October.

What’s keeping USD/JPY below 159.00?

Japan’s warnings and a previous joint intervention with Washington make traders wary of pushing the pair toward 160.

What does the sideways pattern tell us about global risk sentiment?

This sideways movement suggests a cautious, wait-and-see attitude. Investors aren’t finding strong reasons to lean into either risk-taking or risk-aversion, holding out for clearer signals from major central banks.

When is a breakout more likely?

A breakout will likely happen around the Fed’s October 27-28 and BoJ’s October 29-30 meetings. Next week seems pretty calm, with few major catalysts on the schedule.

The USD/JPY pair fades an Asian session uptick to the 158.15-158.20 region, sliding back below the 158.00 mark following Federal Reserve (Fed) Chair Kevin Warsh's opening remarks at the Annual Meetings of the International Monetary Fund and World Bank Group, in Bangkok.

In a conversation with the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, Warsh said that the world has broadly conformed to our expectations since the September FOMC meeting. Warsh added that the Fed has made clear that it would deliver price stability and that he doesn't believe in prejudging meetings. This, along with a further decline in US bond yields, keeps the US Dollar (USD) depressed and exerts some downward pressure on the USD/JPY pair.

Meanwhile, traders remain on high alert amid fears that authorities will step in again to prop up the Japanese Yen (JPY), which contributes to capping the currency pair. However, the growing acceptance that the US central bank will raise borrowing costs again at its December policy meeting, along with persistent geopolitical uncertainties stemming from escalating conflicts in the Middle East, could act as a tailwind for the safe-haven Greenback. This could help limit losses for the USD/JPY pair.

From a technical perspective, the recent repeated failure near the 159.00 mark warrants caution for bullish traders. Adding to this, the Relative Strength Index (14) at 45.03 sits just below the midline and hints at neutral-to-slightly bearish momentum. Furthermore, the Moving Average Convergence Divergence (MACD) (12, 26, close, 9) remains marginally negative, suggesting that upside attempts could stay hesitant until momentum improves or the USD/JPY pair decisively breaks through 159.00.

Spot prices, however, have been finding decent support near the 157.50 horizontal zone, making it prudent to wait for sustained weakness below the said area before positioning for any further losses. The USD/JPY pair might then turn vulnerable to weaken further below the 157.00 round figure and aim towards testing the 156.50-156.45 horizontal support. Nevertheless, traders are more likely to wait for a momentum break in either direction to re-establish a stronger near-term trend for the currency pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

USD/JPY 4-hour chart

Fed FAQs Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

The US Dollar (USD) trades lower against the Japanese Yen (JPY) on Thursday as US Treasury yields extend their reversal from multi-decade highs after the Federal Reserve (Fed) cooled hopes of back-to-back interest rate hikes. The USD/JPY pair trades at 158.00 with bears looking at the bottom of the last two weeks’ trading range, at the 157.50 area.

US Treasury yields climbed following hot US CPI figures Wednesday to retreat sharply after Fed officials dampened market expectations of an October rate hike. The yield of the benchmark 10-year note has dropped by more than 30 basis points from Wednesday's highs, hitting three-week lows at 5.09%, pushing the US Dollar lower across the board.

In Japan, macroeconomic data has been mixed, with Machinery Orders increasing beyond expectations in August, although the country’s Industrial Production for the same month was revised lower.

Also on Thursday, Bank of Japan (BoJ) board member Junko Koeda joined the recent chorus of hawkish BoJ policymakers and called for further rate hikes, amid increasing inflationary risks, although the impact on the Yen was limited.

Technical Analysis: Support at 157.50 comes under pressure as bullish momentum fades

The USD/JPY trades at 157.91, with the near-term bias still bullish but with indicators showing a growing bearish momentum after another rejection at the 159.00 area on Wednesday. The 4-hour Relative Strength Index (14) has dipped below the 50 level, and the Moving Average Convergence Divergence (MACD) is slightly negative, hinting at consolidation rather than outright reversal for now.

Bears should confirm below the 157.50 area, which has capped downside attempts several times over the last two weeks, to increase pressure towards the late September lows at 156.36. A break of that level would highlight a double top at 159.00 and expose the September 17 low, near 155.35.

On the topside, initial resistance is located at the mentioned 159.00 area (September 24, October 14 lows), followed by the 160.00 psychological area and the September 2 high near 160.40.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen Price Today The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-0.60%-0.53%-0.38%-0.27%0.60%-0.42%-0.76%EUR0.60%0.07%0.21%0.31%1.23%0.18%-0.17%GBP0.53%-0.07%0.15%0.24%1.13%0.09%-0.25%JPY0.38%-0.21%-0.15%0.10%1.01%-0.05%-0.39%CAD0.27%-0.31%-0.24%-0.10%0.89%-0.13%-0.49%AUD-0.60%-1.23%-1.13%-1.01%-0.89%-1.02%-1.37%NZD0.42%-0.18%-0.09%0.05%0.13%1.02%-0.36%CHF0.76%0.17%0.25%0.39%0.49%1.37%0.36% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Key Points:EUR/USD pulled back below 1.1150 as traders focused on U.S. inflation data. GBP/USD tested new lows as traders bet on hawkish Fed. USD/CAD gained ground amid sell-off in precious metals markets.

U.S. Dollar Tests Yearly Highs After Inflation Data

DXY 141026 4h Chart U.S. Dollar Index rallied as traders focused on inflation data. Inflation Rate increased from 3.4% in August to 3.7% in September, compared to analyst forecast of 3.6%. Core Inflation Rate grew from 2.4% to 2.6%, compared to analyst consensus of 2.5%. The reports indicated that high energy prices have started to push prices of other goods and services higher.

FedWatch Tool indicates that the probability of a rate hike at the next Fed meeting has increased to 37.1%. Interestingly, traders believe that Fed will keep rates unchanged in October despite rising inflation.

Treasury yields gained ground as bond traders sold bonds after the release of inflation data. The yield of 2-year Treasuries moved towards the 4.85% level, while the yield of 10-year Treasuries settled near 5.24%. Rising yields provided additional support to the American currency.

U.S. Dollar index climbed above the resistance at 102.35 – 102.50 and is trying to settle above the 102.80 level. In case this attempt is successful, U.S. Dollar Index will head towards the resistance at 103.15 – 103.30.

EUR/USD Is Under Strong Pressure

EUR/USD 141026 4h Chart EUR/USD tested new lows as traders focused on inflation data from the U.S. In the EU, traders had a chance to take a look at the Wholesale Prices report from Germany. The report showed that Wholesale Prices increased by +1.9% month-over-month in September, compared to analyst consensus of +0.7%.

EUR/USD pulled back below the support level at 1.1175 – 1.1190 and is trying to settle below the 1.1120 level. If EUR/USD manages to settle below 1.1120, it will head towards the next support, which is located in the 1.1075 – 1.1090 range.

GBP/USD Tests Support At 1.3150 – 1.3165

GBP/USD 141026 4h Chart GBP/USD is under pressure as traders focus on Fed policy outlook. While the market does not expect that Fed will raise rates in October, traders prepare for rate hikes in December and January.

GBP/USD attempts to settle below the support level at 1.3150 – 1.3165. If GBP/USD manages to settle below the 1.3150 level, it will head towards the next support at 1.3030 – 1.3050. RSI remains in the moderate territory, so there is plenty of room to gain momentum in the near term.

EUR/USD Price Forecast

Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.

See all EUR/USD forecasts

USD/CAD Tests New Highs

USD/CAD 141026 4h Chart USD/CAD gained ground as traders reacted to the sell-off in precious metals markets. Gold is down by -1.9%, while silver pulled back by -6%. Other commodity-related currencies are also losing ground in today’s trading session.

If USD/CAD stays above the resistance at 1.4235 – 1.4250, it will head towards the 1.4300 level. A move above 1.4300 will open the way to the test of the resistance level at 1.4350 – 1.4365.

USD/JPY Gains Ground Amid Rising Treasury Yields

USD/JPY 141026 4h Chart USD/JPY is moving higher as traders focus on rising Treasury yields. However, traders are not ready for big moves amid fears about potential interventions from the Bank of Japan.

In case USD/JPY climbs above the 159.00 level, it will head towards the psychologically important 160.00 level. In this scenario, intervention risks will increase, although it remains to be seen whether BoJ would be ready to provide support to the yen.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Latest news and analysis

EUR/USD rises from 17-month low but French fiscal and political concerns linger
The euro/U.S. dollar is recovering from a fresh 17-month low near 1.1150 and hovers just above 1.12 at the time of writing, although the broader bearish structure remains.

French fiscal and political concerns could continue to weigh on the euro. President Emmanuel Macron's government is anxious to pass a budget before the end of the year as it seeks to reassure markets that France can bring down its debt mountain. However, in political jostling ahead of next year's presidential election, opposition parties oppose the government's proposals.

The 10-year yield has risen as high as 4.5% in recent days, but the finance minister insists that France has not yet caught an adverse snowball effect. However, surging costs could spiral into a full-blown debt crisis if action isn't taken soon.

Budget talks have started, and the Socialist motion against the budget was denied after failing to pass an initial hurdle. However, France may need to experience more market pressure before significant progress is made.

The ECB is expected to hike rates once more before the end of the year. The Belgian central bank governor has joined the chorus of policymakers saying that the ECB will probably have to hike rates again. His comments come as inflation data is due later this week and is set to approach 4%, well above the ECB's 2% target.

Growth has been surprisingly resilient, given the energy price spike triggered by the conflict in the Middle East. However, ECB President Christine Lagarde has warned that an escalation in the war remains a key risk, and surging bond yields will weigh on activity more than previously expected. Lagarde also noted that elevated euro area inflation, driven by higher prices, is yet to feed into the broader economy.

Should French debt suffer heavier losses, the ECB may be forced to abandon rate hikes, which could see the euro come under more pressure.

The U.S. dollar is trading cautiously just below 18-month highs ahead of U.S. CPI data. Stronger-than-expected data could raise Fed rate hike expectations and lift the U.S. dollar, creating a headwind for EUR/USD.

EUR/USD forecast – technical analysis

The euro/U.S. dollar has extended its move southwards, falling to a fresh 18-month low of 1.1155 before recovering to 1.12 at the time of writing. This has helped bring the RSI out of oversold territory.

Sellers will look to break below 1.1155 to extend the move southwards towards 1.11 and 1.10, the psychological level.

Any recovery first needs to rise above 1.12. Above here, attention turns to 1.13, the 20 EMA, before the 1.1350 resistance zone and the 50 EMA at 1.1410 come into focus.

USD/JPY looks to US CPI data
USD/JPY is struggling to extend yesterday's bounce, with few signs of meaningful traction on Wednesday amid mixed fundamental cues.

The U.S. dollar is broadly flat as investors look cautiously ahead to the release of U.S. inflation data.

U.S. CPI is expected to show that inflation rose by 0.6% month on month in September, up from 0.4% in August. However, core inflation, which excludes more volatile items such as food and fuel, is expected to ease to 0.2%, down from 0.3%. Inflation data will be followed by PPI figures on Thursday and Federal Reserve Chair Kevin Warsh's speech on Friday, where he may provide more clues on the policy outlook.

The market is currently pricing in a 20% probability of a rate hike in October, but still an 85% probability of a hike before the end of the year. New York Fed President John Williams said the Fed would likely need to hike rates before the end of the year. However, he added that he did not see any rate hikes in 2027.

Hotter-than-expected inflation could see the market reprice Fed rate hike expectations higher, boosting U.S. yields and the dollar.

Meanwhile, reports that Bank of Japan officials are leaning against a rare back-to-back interest rate hike are undermining the Japanese yen and acting as a tailwind for the pair.

Bank of Japan Governor Ueda said policymakers would continue to closely monitor bond yields, reiterating that long-term interest rates should be determined by market forces.

The yen is also under pressure amid rising oil prices as hostilities in the Middle East escalate, raising concerns over supply disruption.

USD/JPY forecast – technical analysis

USD/JPY has extended its recovery from the 152.90 low to a peak of 158.75. The price trades above its rising trend line and the 250 EMA, while the RSI is also above 50, keeping buyers hopeful of further upside.

Buyers will look to rise above 159, the September 24 swing high, before attention turns to the 160 resistance zone.

On the downside, immediate support is seen at the 50 EMA at 158.10 and the 200 EMA at 157.70. Below here, attention turns to 157.25 horizontal support, below which sellers could gain traction towards 155.

Japanese Yen Technical Forecast: USD/JPY Short-term Trade Levels
USD/JPY has rebounded more than 4% from the September low and is attempting to extend a fifth consecutive weekly advance.
Buyers need a sustained push through the 200-day moving average to strengthen the continuation case and expose higher resistance.
A break below the weekly range floor would shift the focus back toward major support at the yearly open.
U.S. CPI and PPI headline the event risk ahead, with hotter inflation potentially reviving Fed tightening expectations and supporting USD/JPY.
Resistance 158.56/73, 159.75, 160.37/74 (key) - Support 157.70/90, 156.67/69 (key), 155.03/23
USD/JPY is holding above a key technical pivot as the recovery from the September low remains intact, but the advance has lost momentum beneath major resistance. The weekly range has tightened considerably, leaving price compressed between support and the 200-day moving average as traders await the next directional break. With U.S. CPI and PPI on deck, the coming sessions could provide the catalyst needed to resolve the range and shape the next leg of the trend. Battle lines drawn on the USD/JPY short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen setup and more. Join live on Monday’s at 8:30am EST.

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In last month’s Japanese Yen Short-term Technical Outlook we noted that USD/JPY was, “approaching a major technical hurdle near the yearly lows. While the outlook remains tilted to the downside, the bears may be vulnerable near-term heading into the lower bounds of the proposed downtrend. From a trading standpoint, rallies should be limited to 156.67 IF price is heading lower on this stretch..” USD/JPY reversed the following day with a rally of more than 4% attempting to mark a fifth consecutive weekly advance. The rebound takes price back into the 200-day moving average with the weekly opening range now set just above a well-defined technical pivot zone. The focus is on a breakout in the days ahead for near-term directional guidance.

Japanese Yen Price Chart – USD/JPY 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Notes: A closer look at Japanese Yen price action shows USD/JPY straddling a key pivot zone of r the past-four weeks at 157.70/90. This region is defined by the 2025 high-day close (HDC) and the November high and now defines the weekly range low. Note that a three-point confirmed trendline extending off the October lows also converges on this zone.

Initial resistance is eyed at the 200-day moving average and the September high-day reversal close at 158.56/73. A topside breach / close above this threshold would be needed to fuel the next leg of this advance towards subsequent resistance objectives at the 61.8% retracement of the July decline at 159.75 and 160.37/74- a region defined by the April high-close (HC), the September high, and the 2024 high-week close (HWC). Look for a larger reaction there IF reached.

A break below the weekly range lows would threaten a larger pullback towards the 2026 yearly open and the 38.2% retracement of the September rally at 156.67/69. A break / daily close below this threshold would be needed to suggest a more significant high is in place and a larger reversal is underway. The next major technical consideration is eyed at the May & August lows and the 61.8% retracement at 155.03/23.

   
       

Bottom line: USD/JPY is attempting to stabilize above a key pivot zone with the weekly opening range taking shape just below the September high day close. From a trading standpoint, the immediate focus is on a breakout of the 157.70-158.73 range for guidance with the bulls vulnerable while below the 200-day moving average.

The economic calendar picks up over the next few days with the release of September U.S. inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI). With expectations for an October Fed rate hike having diminished considerably, a hotter-than-expected inflation reading could revive the prospect of earlier tightening, supporting Treasury yields and the U.S. dollar. A downside surprise, however, could further push back expectations for the Fed’s next move, eroding support for the greenback and opening the door for another leg lower in USD/JPY. Keep in mind that the threat of official Japanese intervention continues to loom over the trade, with authorities retaining the option to step in should yen weakness accelerate. Stay nimble into the releases and watch the weekly close for guidance. Review my latest Japanese Yen Weekly Forecast for a closer look at the longer-term USD/JPY technical trade levels.

Key Economic Data Releases

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex

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Analysts expect the Yen to strengthen against the US Dollar, but Japanese investors' continued overseas buying challenges the pace of recovery. Japanese investors are still buying foreign assets heavily, testing Goldman Sachs' expectation that a shift in domestic policy will help the Yen recover against the US Dollar over the next year.

Goldman's latest forecasts put USD/JPY at 158 in three months, around January 2027, and 150 in 12 months, around October 2027.

The pair ended Friday near 158.33, leaving its near-term projection close to the market while the longer forecast requires a meaningful Yen appreciation.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 158.32755 (+0.17%)

Euro to Dollar (EUR/USD): 1.120134 (-0.10%)

Pound to Dollar (GBP/USD): 1.323299 (+0.03%)

An 8 October study of Japanese portfolio flows shows why that recovery may take time: investors with unhedged overseas holdings have yet to change direction decisively, even as banks sell foreign bonds.

Goldman's Karen Reichgott Fishman and colleagues say: "We recently turned structurally bullish Yen as the domestic policies that have weighed on the currency for much of the past 10-15 years appear to be shifting in a more supportive direction. The BoJ has seemingly shifted to a faster pace of hikes and, most importantly, there appears to be a focus within the government on encouraging some reallocation by domestic investors back towards domestic assets."

The latest evidence tests the shift behind Goldman's September reduction in its 12-month Dollar-Yen forecast from 165 to 150.

Higher Japanese rates can improve the return available at home, but a stronger domestic investment proposition still has to persuade savers to change what they buy.

Overseas equity buying remains strong The Goldman analysts say: "We have been of the view that any shift in flows would likely be a slower-moving process, and so far that looks true among mostly unhedged investors."

Their reading of the Finance Ministry's September securities transactions release shows investment trusts, including retail investors and NISA savings-account flows, buying a net $8.7 billion of foreign equities, slightly more than in August.

NISA is Japan's tax-advantaged investment-account system.

MUFG's 9 October assessment reinforces that concern over a longer window.

Derek Halpenny, MUFG's head of research for global markets EMEA and international securities, says: "The buying has picked up and the 3mth sum of foreign equity purchases totalled JPY 3,949bn, a new record over a 3mth period."

Halpenny adds: "This Investment Trust flow captures households buying of foreign securities via NISA accounts and it remains clear that the expanded NISA limits adopted in January 2024 continues to have a notable impact."

Purchases of overseas investments without currency hedges create exposure to foreign currencies, potentially sustaining demand for them even as Japan's interest rates rise.

There is some moderation elsewhere, but slower buying is still different from bringing money home.

Goldman says: "The trust accounts category, which includes the public pension fund, suggests that net purchases of foreign bonds continued in September, but at a slower pace than in August ($7.6bn vs $14.7bn in August) and below the average pace of the prior six months ($8.6bn)."

"More broadly, our preferred estimate of key unhedged investor flows suggests that demand for foreign assets has generally persisted at a similar pace over the past year and shows no obvious signs of rotation. If that were to change, however, these data would be the first place to see it."

Bond sales do not tell the whole currency story Japanese banks' foreign-bond sales accelerated to $15.9 billion in September, according to Goldman, while life insurers also remained net sellers.

Those sales could look like evidence supporting Goldman's recovery forecast, but currency hedges change their significance.

Goldman says: "While less relevant for the Yen, repatriation flows have been evident in the data for typically hedged investors (mainly banks and roughly 40% of flows by Lifers)."

A currency hedge already offsets some or all of an overseas holding's exchange-rate exposure, so selling the asset and unwinding that protection need not generate equivalent fresh demand for Yen.

The question is whether domestic policy can alter the choices of investors who have bought abroad without protection.

MUFG points to discussions about allowing Japanese government bonds within NISA accounts, following Finance Minister Satsuki Katayama's July suggestion that their inclusion should be considered.

That remains a potential policy change, rather than an implemented incentive already redirecting savings.

Halpenny says: "Providing tax-free opportunities to hold JGBs could well have an impact on the flows to foreign equity markets that is so evident today and given the scale of foreign equity purchases currently would be viewed as a clear yen positive."

Key Highlights

USD/JPY started a fresh increase from the 156.40 support. A breakout pattern is forming with resistance at 158.40 on the 4-hour chart. EUR/USD struggled to recover and remained below the 1.1250 pivot. Bitcoin corrected some gains and might revisit $80,000. USD/JPY Technical Analysis The US Dollar remained supported above 156.40 against the Japanese Yen. USD/JPY formed a base and started a fresh increase above 157.00.

Looking at the 4-hour chart, the pair surpassed the 50% Fib retracement level of the downward move from the 159.03 swing high to the 156.37 low. The pair settled above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

It is now consolidating below the 76.4% Fib retracement. There is also a breakout pattern forming with resistance at 158.40. A close above 158.40 could initiate a steady increase.

The first major resistance might be 159.00. The next key resistance could be near 160.00, above which the pair could aim for a move to 161.20. If there is a fresh downside correction, the pair could find support near the confluence area of the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour) at 157.25.

The first major support might be 156.40. A close below 156.40 might accelerate the decline. In the stated case, the pair might drop to 155.00.

Looking at EUR/USD, the bears remained in action, but they seem to be losing steam and the pair might attempt a recovery wave.

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USDJPY remains constructive and moved to the upper side of four-day congestion but continues to face headwinds from fading bullish momentum and freshly formed 55/200DMA death cross (strong resistance zone at 158.33/92 provided by falling 55DMA, 20 DMA and Fibo 76.4% of 160.39/152.93).

Another obstacle would be hawkish signals from BoJ, as rising inflation keeps the central bank highly alerted, while expectations for Fed Oct rate hike faded after downbeat Sep NFP data.

Daily studies show neutral to negative alignment, Ichimoku cloud turns down and started thickening that may also obstruct upside attempts (cloud base lays at 159.36) along with other indicators.

We still lack clearer direction signal, which could be developed on clear break above MA’s, cloud, as well as lower top at 159.03 (positive) or dip below 157.52 (broken Fibo 61.8%) and acceleration through supports at 156.64 (daily Kijun-sen / broken 50% retracement) that will be needed to confirm bearish signal.

Wednesday’s release of FOMC September policy meeting Minutes will be closely watched for fresh signals.

Res: 158.33; 158.62; 158.86; 159.03
Sup: 157.52; 156.95; 156.64; 155.75

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USD/JPY edged higher to 157.90 on Tuesday, with the yen remaining within a narrow range. Markets are assessing the direction of Prime Minister Sanae Takaichi’s government, which continues to pursue stimulative fiscal policy despite concerns over the weak yen and the funding of government spending.

In a speech to parliament, Takaichi pledged to cut the consumption tax on food. At the same time, she stressed that the government would seek to finance its spending without issuing additional bonds. This should provide some reassurance to markets amid concerns over rising public debt and yields.

This week, investors are awaiting several key reports from Japan: August wage data, the current account and household spending, as well as September indicators of consumer confidence and machine tool orders.

Attention is also focused on the Bank of Japan. The summary of opinions from its September meeting reflected growing concern that inflation could remain above the 2% target for longer. This keeps the prospect of another rate hike before year-end alive, although the timing of the next move ahead of the October and December meetings remains unclear.

Technical Analysis

USD/JPY maintains a short-term upward structure but is trading within a narrowing range. On H4, following a recovery from the 156.50 area, the pair settled above 157.54 and formed a consolidation range around 157.86–157.96. The main scenario envisages a further rise towards resistance at 158.77. A break above this level could open the way towards 159.36, although 158.77 remains the primary target for now. After testing this level, a correction back towards 157.96–157.86 is likely.

On H4, the price remains above the ascending support line, while further gains are capped by the descending boundary of the local structure. A triangle is therefore forming, with gradually rising lows. The MACD indicator is near zero: the histogram retains slight positive momentum, supporting the bullish scenario while also indicating moderate buying momentum. A move below 157.54 would weaken the bullish scenario and increase the likelihood of a return towards 156.50.

On H1, the pair also remains in consolidation around 157.96. The latest move is higher, and the Stochastic oscillator has risen above 80, confirming buying momentum. At the same time, the oscillator’s position in the overbought zone increases the likelihood of a local pullback following the rise. As long as the price remains above 157.80, the priority is for a move towards 158.77, followed by a correction towards 157.96. A confirmed break and consolidation above 158.77 would bring 159.36 into focus as the next medium-term upside target. Until the triangle is broken, volatility may remain limited, while holding above 157.96 would confirm the current scenario.

Conclusion USD/JPY is trading marginally higher as markets assess Prime Minister Takaichi’s fiscal plans and await a series of Japanese economic releases. Her pledge to cut the consumption tax on food without additional bond issuance has partially eased concerns over debt sustainability. Meanwhile, the BoJ’s September meeting summary highlighted growing inflation concerns, keeping the prospect of another rate hike before year-end alive, although the timing remains uncertain. Technically, the pair maintains a mild bullish bias within a narrowing triangle, with 158.77 as the immediate target and 159.36 as the next medium-term target. A break below 157.54 would weaken the bullish scenario and expose 156.50, while holding above 157.96 would reinforce the current scenario.

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TL;DR: The Nikkei 225 is closing in on a fresh record near 72,831.73, but unlike June’s rally—when USD/JPY ran alongside it to 163.97—a faster BoJ tightening cadence, a more patient Fed, credible intervention risk and the absence of a fresh oil shock mean USD/JPY is unlikely to follow through the 160 zone this time.

Why This Matters Japan’s equity rally is again approaching the point where the Nikkei’s strength and Yen weakness were closely linked earlier this year. But the comparison only goes so far. The equity breakout looks genuine, and the question that matters for traders isn’t whether the Nikkei can retest its record—it’s whether USD/JPY has to follow the same script it did in July. Four specific differences argue it doesn’t, at least not yet, and each one has a clear condition that would reverse it.

The Nikkei 225 surged 2.40% to 69,946.64 today, clearing the 69,608.24 August swing high and moving to within roughly 4% of the 72,831.73 record. When the Nikkei last set a record in June, USD/JPY was already above 161 and subsequently extended its advance to 163.97 in late July. This time, USD/JPY is still around 157.7, almost six yen below that peak.

Nikkei Breakout Has Real Momentum The Nikkei’s break above 69,608.24 strengthens the view that price action from 72,831.73 is merely a correction of the rise from 50,566.99, rather than the start of a larger downtrend.

As long as 68,132.16 support holds, the immediate bias stays higher. The next upside target is 71,885.52, the 100% projection of the 60,448.90–69,608.24 advance from 62,726.18. Above there sits the 72,831.73 record high. The chart therefore gives the Nikkei a credible path back to its record. What is much less clear is whether USD/JPY still needs to accompany it.

July’s Run to 163.97 Needed More Than a Rising Nikkei The last Nikkei record was followed by another leg higher in USD/JPY, but the Yen move was not simply a mechanical consequence of Japanese equity strength. By late July, several forces had aligned in the same direction.

The Fed had turned more hawkish, markets were pricing additional US tightening, Treasury yields were elevated and the Yen had spent enough time above 160 for investors to question where Tokyo’s intervention threshold actually stood.

Then oil supplied another impulse. Brent had been near 70 earlier in the summer before surging above 100 as Middle East risks intensified, following the collapse of the US-Iran ceasefire. That created a fresh inflation shock just as markets were debating how much further the Fed might have to tighten. USD/JPY eventually reached 163.97. That combination is important because the current setup looks different in each of those areas.

1. BoJ Tightening Is Arriving Faster The first difference is the BoJ cadence. The Bank of Japan raised rates in December, again in June and then in September. The interval shortened from roughly six months to around three months.

That does not mean every BoJ hike immediately strengthens the Yen. The June move was followed by USD/JPY rising further toward 164, while the Yen also weakened immediately after September’s increase. But the medium-term significance is different: the market can no longer comfortably assume that the BoJ will wait half a year between every move. A roughly quarterly cadence, if sustained, would allow Japanese rates to rise alongside US rates rather than simply watching the Fed move away. That distinction matters more than the immediate FX reaction to any single meeting.

The BoJ has not explicitly committed to that pace, and expectations for another October hike remain low. December is a more plausible window under the current market view. So the argument should not be that the BoJ is embarking on an aggressive tightening cycle. Rather, the Japan side of the rate differential is now moving faster than it was earlier this year.

2. The Fed Is Still Tightening, But at a More Patient Pace The second difference is the Fed. Markets have not abandoned the tightening cycle. The expected Fed funds midpoint is around 4.12% in December, 4.39% in March and 4.61% in June, before flattening around 4.65–4.70% later in 2027. That is still a hawkish rate path.

But it is a patient tightening path, not an assumption of rapid back-to-back hikes. October hike probability has fallen sharply, while the curve increasingly spreads additional tightening over subsequent meetings. That matters for USD/JPY because the policy gap is not obviously entering another period of rapid expansion.

The most revealing market comparison is elsewhere. US yields have recently traded above the levels seen around July’s USD/JPY peak, yet USD/JPY remains almost six yen beneath 163.97. That suggests the simple mapping between US yields and USD/JPY has weakened. Higher US rates still support Dollar against Yen. But the same yield environment is producing less Yen depreciation than it did in July, indicating that BoJ policy and intervention risk are now carrying greater weight on the Japan side of the equation.

3. Above 160, Intervention Risk Is No Longer Abstract The biggest change since July is not simply that Japan has intervened before. It is that 160 now carries the memory of a joint US-Japan operation, reinforced by persistently tougher official rhetoric since then.

Earlier in the summer, the market had become increasingly comfortable trading above 160. USD/JPY spent weeks above that threshold, and repeated warnings from Tokyo failed to trigger immediate action. That encouraged the view that officials were prepared to tolerate a materially weaker Yen, allowing speculative positioning to build as the pair pushed toward 163.97.

The end-July intervention changed that calculation decisively. The operation was not just another unilateral attempt by Japan to slow Yen weakness; US participation gave the move much greater signalling power. Even though the exchange-rate effect faded relatively quickly, the message was harder to dismiss: both sides were prepared to act when Yen depreciation became disorderly enough.

Since then, Japanese officials have also maintained a consistently tougher rhetorical stance, keeping intervention risk alive rather than allowing the warning to fade with time. That matters because traders are now approaching 160 with a very different risk-reward calculation. The level is no longer merely a psychological threshold or a place where verbal intervention might intensify. It is the zone around which coordinated action has already occurred.

That does not make 160 a hard cap. Intervention cannot permanently overpower monetary-policy fundamentals, and USD/JPY recovered much of its initial decline after the July operation. But it does mean that long positions above 160 now carry a known and credible tail risk that was far less respected during the previous run toward 164.

4. July Had an Oil Shock; Today Has High Oil Oil may be the most important difference. Brent is still expensive above $100, but the dynamic is very different from July. The crucial distinction is: high oil is a condition. Rising oil is a catalyst.

The July USD/JPY rally was reinforced by a rapid oil surge that changed the inflation outlook and encouraged markets to price a more aggressive or extended Fed cycle. Brent near 101 today does not deliver the same incremental shock. Markets already know energy prices are high.

For oil to recreate July’s transmission mechanism, it likely needs to re-accelerate through 109.97 and decisively above the 110 area, rather than simply remain around 100. That would revive the transmission chain: an oil shock would lift inflation expectations, encourage more aggressive Fed pricing and renew pressure on Yen. Until then, energy is providing a high inflation floor without the fresh momentum that helped drive USD/JPY toward 164.

What Could Put 164 Back Into Play? The argument against another immediate move to 164 is conditional, not absolute. The cleanest invalidation would be another oil shock. A decisive Brent break above 109.97–110, particularly if driven by renewed Middle East escalation, could force markets to reconsider the persistence of inflation and push the expected Fed rate plateau higher again.

A second trigger would be a renewed acceleration in Fed tightening expectations. The upcoming FOMC minutes are relevant here: evidence that officials are comfortable with an extended sequence of hikes into 2027 would reinforce the Dollar side of the equation.

The third would simply be price itself. A decisive USD/JPY break through the 159.73–160.38 resistance cluster would indicate that the decline from 163.97 has likely completed. That would put the 162.51 100% projection back into view and dramatically reduce the distance to 163.97. But until those conditions emerge, the July analogy looks incomplete.

ActionForex’s Technical View on the Nikkei 225 Nikkei’s immediate technical structure is bullish while 68,132.16 holds. The break above 69,608.24 resumes the rebound from 60,448.90 and points toward 71,885.52. A break there would put the 72,831.73 record high directly in focus.

The significance of 68,100–68,132 is especially strong because structural support coincides with the 61.8% retracement near 68,101. Holding that zone would keep the latest breakout intact even after a short-term pullback. A close back below 68,100 would weaken the breakout and shift attention toward the 55 D EMA at 65,862.82. For now, however, the chart favors another test of the record.

ActionForex’s Technical View on USD/JPY USD/JPY presents a much less straightforward bullish structure. The rebound from 152.87 stalled at 159.02, and subsequent trading has been consolidative rather than impulsive. Price is currently around 157.7 and pressing the 55 D EMA around 158.09. A fresh rise cannot be ruled out while 156.36 holds, but there is little open space above.

The resistance sequence is:

158.09 — 55 D EMA 159.02 — September swing high 159.73 — 61.8% retracement of 163.97–152.87 160.16 — 61.8% projection of 152.87–159.02 from 156.36 160.38 — structural resistance 160 area — intervention-risk zone

That cluster is the technical expression of the article’s macro thesis. A decisive break through 160.38 would be important: it would suggest the decline from 163.97 has completed and expose 162.51, the 100% projection level, followed by a potential retest of 163.97. But rejection from the zone would leave USD/JPY trapped well below the level reached during the previous Nikkei record run. Below 156.36, attention would return to 155.22, with a deeper break reopening the 152.87 low.

The Nikkei therefore has the clearer bullish chart. Japan’s equity market can retest 72,831 without USD/JPY returning to 164. For the Yen to recreate July, it likely needs more than another equity record—it needs a renewed oil shock, stronger Fed acceleration, or enough momentum to force its way through the intervention-heavy 160 zone.

Key Takeaways The Nikkei 225 surged 2.40% to a fresh high, closing within roughly 4% of its 72,831.73 record—but USD/JPY sits nearly six yen below where it traded during June’s record run. A faster BoJ hiking cadence (roughly quarterly versus the prior six-month gap) means Japan’s side of the rate differential is now moving faster than earlier this year. The Fed’s tightening path remains hawkish but more patient, and US yields above July’s peak are producing less Yen depreciation than before—suggesting BoJ policy and intervention risk now carry more weight. The end-July US-Japan coordinated intervention, plus sustained tougher rhetoric since, has made 160 a zone with known, credible tail risk rather than just a psychological level. Without a fresh oil shock (Brent decisively above 109.97–110) or a hawkish surprise from Fed policy or price action through 160.38, USD/JPY’s path back to 164 looks far less automatic than it did in July.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

TL;DR: EUR/JPY and AUD/JPY have broken key technical support this week, but the weekly performance breakdown shows only 0.1–0.3 percentage points of that weakness comes from genuine Yen strength—the rest reflects Dollar and Yen as the two strongest majors, with intervention risk capping USD/JPY and forcing Euro, Aussie, Sterling and Kiwi weakness to pass directly into their Yen crosses.

Why This Matters When several Yen crosses break support in the same week, the reflexive read is a broad Yen rally. But cross rates are arithmetic, not sentiment, and the underlying math this week tells a more specific story: Yen is not surging broadly, it is being held up by an intervention ceiling on one specific pair. That distinction matters directly for how far EUR/JPY and AUD/JPY can fall, and it hands traders a clean diagnostic—USD/JPY itself—for telling a contained cross-driven move apart from the start of a genuine Yen rally.

It Looks Like a Yen Rally, but the Arithmetic Says Otherwise EUR/JPY and AUD/JPY have both broken important technical support this week. GBP/JPY and NZD/JPY have weakened alongside them. At first glance, the price action looks like a broad Yen rally. But the weekly performance breakdown tells a more specific story.

EUR/USD is down around -0.91%, compared with a -1.04% decline in EUR/JPY. AUD/USD has fallen roughly -1.82%, while AUD/JPY is down -1.97%. The same pattern extends to Sterling and Kiwi: GBP/USD is down around -0.69% versus -0.98% in GBP/JPY, while NZD/USD has fallen -1.12% against -1.41% in NZD/JPY.

That means only around 0.1 to 0.3 percentage point of the weakness in those Yen crosses reflects additional Yen appreciation beyond what is already happening against the Dollar. USD/JPY itself is almost unchanged on the week. The real picture is therefore that Dollar and Yen are the two strongest major currencies, while Euro, Aussie, Sterling and Kiwi are losing ground against both.

That raises the more interesting question: why is that relative strength producing outright breakdowns in EUR/JPY and AUD/JPY while USD/JPY itself is barely moving?

Dollar Strength Survives a Collapse in October Hike Odds The Dollar side of the equation is particularly notable because one of its recent supports has weakened sharply. CME FedWatch pricing now puts the probability of an October Fed hike at around 47%, down from roughly 71% a day earlier. The shift followed New York Fed President John Williams’ remarks in Buffalo on Tuesday. Williams said there was “no need for urgency” after September’s rate increase and that, if the economy develops broadly in line with his forecast, one further hike may be appropriate “late this year.”

That has turned October from something markets were leaning toward heavily into something much closer to a coin flip. But it has not produced a corresponding collapse in the Dollar.

Part of the reason is that Williams’ message was about timing, not an outright rejection of further tightening. Federal Reserve Governor Michael Barr continued to argue that further policy adjustments are likely to be required, while Chicago Fed President Austan Goolsbee warned that keeping inflation above target for so long was “playing with fire.”

More importantly, U.S. Treasury yields remain historically elevated even after easing from their latest highs. The 10-year yield reached its highest level since 2007 this week, while the broader bond selloff has kept U.S. yields high enough to preserve substantial structural support for the Dollar. So the Dollar story has changed, but not reversed: the market has lost conviction that the next Fed hike must come in October, but it has not lost the high-yield environment that made the Dollar attractive in the first place.

Yen Strength Comes From an Intervention Ceiling The Yen is being supported by a very different mechanism. The BOJ raised its policy rate to 1.25% on September 18, the highest in 31 years. But the Yen did not respond with a sustained rally because Governor Kazuo Ueda stopped short of delivering a clearly accelerated tightening path, while two board members dissented from the hike.

What changed subsequently was the intensity of the currency-policy warning. U.S. President Donald Trump raised concern over Yen weakness directly with Japanese Prime Minister Sanae Takaichi during their September meeting. Finance Minister Satsuki Katayama subsequently said both governments shared concerns about the Yen’s undervaluation, while Katayama and U.S. Treasury Secretary Scott Bessent agreed to maintain close communication on foreign exchange. Those exchanges came after coordinated U.S.-Japan Yen-buying intervention earlier in the year. Japan’s top currency diplomat Atsushi Mimura then reinforced the message on Monday, telling markets to take the “very clear” warning from Tokyo and Washington “at face value.”

That history makes the current jawboning harder to dismiss as routine rhetoric. But the effect so far is more specific than a generalized surge in Yen demand—it is acting as a ceiling over USD/JPY. And that distinction explains what is happening in the crosses.

Why Intervention Risk Hits the Crosses Harder Cross rates are arithmetic. EUR/JPY can be expressed through EUR/USD and USD/JPY, and the same relationship applies to AUD/JPY, GBP/JPY and NZD/JPY.

In a conventional broad-Dollar rally, the two legs partially offset each other. Suppose EUR/USD falls because the Dollar strengthens: under normal circumstances, that same broad Dollar strength would also lift USD/JPY, cushioning the decline in EUR/JPY. This week, that cushion is largely absent. Intervention risk is preventing USD/JPY from participating fully in the Dollar’s wider advance—the Dollar can strengthen sharply against Euro, Aussie, Sterling and Kiwi without making comparable progress against Yen. The weakness in those currencies therefore passes much more directly into their Yen crosses.

That is why EUR/JPY can break lower even though USD/JPY is barely moving, and why AUD/JPY can suffer an even sharper decline when Aussie is already under independent pressure following the RBA and Governor Michele Bullock’s cautious guidance. The key mechanism is therefore not that intervention risk is generating enormous standalone Yen demand—it is that intervention risk is removing the offset that would normally cushion Yen crosses during a broad Dollar rally.

ActionForex’s Technical View on EUR/JPY, AUD/JPY and USD/JPY EUR/JPY Heads Toward the 175.26–175.41 Test

The technical picture in EUR/JPY fits that mechanism closely.

The break of 177.82 support argues that the decline from 187.93 has resumed. Near-term risk therefore remains on the downside while 181.53 resistance holds.

But the larger fall can still be treated as a correction of the medium-term rally from 154.77 to 187.93, rather than a confirmed trend reversal.

The key test is the 175.26–175.41 support zone.

The 175.26 level represents the 38.2% retracement of the 154.77–187.93 advance, while 175.41 corresponds closely with the 2025 high. That makes the area an important technical confluence where a stronger rebound could emerge.

A sustained recovery above 181.53 would be the first meaningful indication that a short-term bottom has formed.

A decisive break through 175.26–175.41, however, would materially weaken the medium-term structure and increase the risk that the decline has become more than a correction. In that case, the 167.44 area, the 61.8% retracement of the same advance, would become the next major downside reference.

AUD/JPY Has the Cleaner Bearish Structure

AUD/JPY is technically more vulnerable.

The decline from 114.95 resumed with the break of 109.66, while the subsequent loss of 109.25 confirms that the correction is now retracing the much larger advance from 86.03.

The bearish case is also reinforced by the pair’s earlier rejection from the daily 55 EMA.

The next downside objective is around 107.32, representing the 100% projection of the 114.95–109.66 decline measured from 112.61.

A firm break there would expose 103.90, the 38.2% retracement of the entire 86.03–114.95 rally.

Any rebound should remain corrective while 112.61 resistance holds.

That gives AUD/JPY a cleaner downside structure than EUR/JPY, while the fundamental backdrop also reinforces it: Aussie is absorbing both broad Dollar strength and its own post-RBA repricing at the same time that intervention risk is preventing USD/JPY from providing an offset.

USD/JPY Is the Control Chart

USD/JPY is the most important chart for deciding whether this interpretation remains valid.

The pair has retreated from 159.02, but the decline has so far looked more like a corrective pullback than a renewed collapse from the larger 163.97 high.

Price is now testing the 156.67 area, corresponding to the 38.2% retracement of the rebound from 152.87 to 159.02.

If that support holds and USD/JPY turns higher, the intervention-cap interpretation remains intact. Officials may be limiting the Dollar’s upside against Yen, but they have not yet produced a decisive bearish reversal.

A recovery through 159.02 would strengthen that view and reopen 160.38.

By contrast, sustained weakness through the current support area would begin to signal something broader than an intervention-constrained Dollar rally. A break back through 152.87 would materially weaken the rebound structure and expose 151.92, around the 50% retracement of the larger rise from 139.87 to 163.97.

That creates a useful diagnostic:

If USD/JPY holds while EUR/JPY and AUD/JPY continue falling, the relative-strength mechanism remains intact. If USD/JPY itself starts breaking major support, then the story is becoming a genuine broader Yen rally. When Does This Become a Real Yen Rally? The technical picture currently mirrors the fundamental thesis unusually well. EUR/JPY and AUD/JPY have both broken important support and are carrying weak momentum. USD/JPY, by contrast, remains caught between a strong Dollar backdrop and increasingly credible Japanese intervention warnings, leaving the Yen crosses to absorb most of the adjustment. For EUR/JPY, 175.26–175.41 is the next major structural test; for AUD/JPY, the immediate focus is 107.32, with 103.90 becoming vulnerable if the correction extends.

But USD/JPY remains the control chart. As long as it holds around the current support structure, the breakdown in Yen crosses can still be understood primarily as weak Euro, Aussie and other currencies being transmitted through a USD/JPY pair capped by intervention risk. A sustained USD/JPY break lower would change that conclusion. Until then, the crosses may look like they are leading a broad Yen rally. The arithmetic says they are mostly revealing what happens when Dollar strength has nowhere to go against Yen.

Key Takeaways Only 0.1–0.3 percentage points of this week’s EUR/JPY, AUD/JPY, GBP/JPY and NZD/JPY weakness reflects genuine Yen strength beyond what’s already priced against the Dollar. October Fed hike odds fell to 47% from 71% after Williams’ remarks, but elevated Treasury yields have kept the Dollar’s structural support intact. Japan’s intensifying intervention warnings, from Trump-Takaichi talks through diplomat Atsushi Mimura, are capping USD/JPY specifically rather than lifting Yen broadly. That cap removes the usual offset in Yen crosses, so Euro, Aussie, Sterling and Kiwi weakness passes more directly into EUR/JPY and AUD/JPY. USD/JPY is the key diagnostic: holding support near 156.67 keeps this a cross-driven story, while a break below 152.87 would signal a genuine broad Yen rally.

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Summary:

Japanese officials warned about the yen's undervaluation. That, along with coordinated messaging from the US, pushed the yen up nearly 1% against the dollar, even as the broader DXY index held above 101. The yen's recent strength appears driven by an increased risk of intervention, not a classic flight to safety. Meanwhile, Treasury yields and rate differentials still favor the dollar. The yen could strengthen further in the near term if Tokyo maintains its verbal pressure. The US dollar has gained ground over the past two weeks. Higher US Treasury yields and persistent inflation worries are keeping the US Dollar Index (DXY) above 101.

The USD/JPY exchange rate, however, has recently bucked that trend. The Japanese yen gained almost 1% in just two trading days, sending USD/JPY from recent highs near 158.80 to roughly 157.15.

This divergence warrants close attention as it appears to be a significant market movement and is not simply noise.

Why the Dollar Keeps Climbing Several factors are boosting the dollar’s overall strength. They include high US Treasury yields, oil prices above $107 a barrel, and growing expectations for more Federal Reserve rate hikes. These have helped the DXY near its best monthly performance since June, with a projected 1.7% gain for September.

Fed Governor Lisa Cook recently reinforced a hawkish outlook. She suggested that productivity gains from artificial intelligence likely won’t be enough to counter immediate inflation pressures. Meanwhile, MUFG sees 101.80 as the dollar’s next resistance level.

At the same time, Japanese officials are talking more about the yen’s value. Both Finance Minister Satsuki Katayama and currency official Atsushi Mimura have called the yen’s undervaluation a concern.

They’ve pointed to recent talks between Prime Minister Sanae Takaichi and US President Donald Trump, along with conversations with Treasury Secretary Scott Bessent, as signs that both sides share concerns about currency levels.

The yen’s recent strength looks like it’s more about potential official intervention than just interest rate gaps. Japan has intervened by selling dollars before, and officials hint they might do it again.

What this Says About Risk Appetite A stronger yen usually points to investors moving away from risky assets, as it’s considered a safe haven. But this time, its rise feels different.

It’s not linked to falling stock markets or a broad rush for safety. Instead, it mainly comes from official statements and the chance of intervention specifically aimed at USD/JPY.

This suggests policy is driving the yen’s move, not a change in overall market risk appetite. The dollar’s continued strength against other major currencies, like the euro and pound, indicates that general market sentiment hasn’t really turned cautious.

The Yen Will Struggle to Hold On to Gains The yen could see more gains in the near term. If Japanese officials continue to voice worries about its undervaluation, or if their US counterparts support a stronger yen, USD/JPY might stay under market pressure.

Also, if the Bank of Japan speeds up its rate increases, that would help close the yield gap with other economies, which would support the yen.

Still, the core reasons for the dollar’s strength persist. Strong US economic data and the Federal Reserve’s probable additional tightening mean a notable interest rate difference will likely remain.

So, for USD/JPY to extend the decline for longer, we’d likely need a clear policy change from Japan, or a major downturn in market sentiment that triggers a broad unwinding of carry trades.

Why has the yen strengthened while the DXY remains firm above 101?

Japanese officials warned against further yen weakness. This raised intervention risk and prompted short covering in USD/JPY, even as the broader dollar gained ground.

What role do US-Japan discussions play in the recent move?

Comments from Prime Minister Takaichi and Treasury Secretary Bessent about the yen’s undervaluation fueled market expectations. They suggested coordinated policy pressure would back the currency.

Does the yen’s gain signal a broad decline in risk appetite?

Not really. Equity markets aren’t showing crisis conditions. Instead, the yen’s move seems driven more by policy than a typical flight to safety.

US dollar bulls returned in force last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. Meanwhile, futures traders increased bearish exposure to both the euro and British pound as the dollar rally gathered momentum.

View related analysis:

Australian Dollar Outlook: AUD/USD Holds 70c Ahead of RBA and CPI
AUD/USD Q4 Outlook: RBA and Fed Hikes Set the Tone
Yen Bulls Bruised by BOJ, But Intervention Could Prove Them Right
How to Read the COT Report to Track Forex Market Sentiment

US Dollar Longs Surge as Euro and Pound Positioning Turns Bearish
Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Net-longs rose at their fastest weekly pace in seven years by $12.5 billion to $17.3 billion
EUR/USD: Asset managers reduced net-longs by 35k contracts and large specs increased net-shorts by 25k contracts
GBP/USD: Net-shorts increased a combined 50.5k contracts to mark their fastest weekly rise in three months
USD/JPY: Traders remained net-long by a combined 113k, despite a reduction of around 58k contracts last week
USD/CHF: Only minor adjustments kept net-short exposure to the Swiss franc by a combined 62.2k contracts
USD/CAD: Prices continued to fall at a faster pace than net-shorts increased, suggesting the late surge of gross-longs have since been forced to cover
AUD/USD: Open interest fell at the fastest weekly pace on record, though net-short exposure only increased marginally
NZD/USD: Large specs and Asset managers reverted to net-short exposure

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

FX Futures Positioning | COT Report (IMM Data)
US Dollar Index (DXY) Futures Positioning | COT Report
We saw a strong influx of bullish bets on the US dollar last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. And I suspect we’ll see a further increase by the time the next COT report drops, given DXY was only up 0.4% by Tuesday’s close – and went on to rise a further 0.8% by Thursday’s high.

The US dollar index has now rallied 2.6% in 11 days, so I do not think Friday’s pullback is enough to call an end to this rally. Especially since neither the US dollar index nor net-long exposure is near a sentiment extreme.

Traders have a plethora of Fed members speaking this week, alongside ISM, NFP and PCE inflation. My guess at this stage is that they will show a strong economy with inflationary pressures, which leaves little room for Fed members to be any less hawkish than they have been since their last hike.

Source: CFTC (COT), ICE, LSEG

This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of FOREX.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by FOREX.com.

EUR/USD Futures Positioning | COT Report
My assumption over the past few months that the euro had bottomed is on the brink of being invalidated. But with momentum moving aggressively towards those swing lows, we may not need to wait for the break to invalidate it. The way prices move to or from a level can sometimes be just as, or even more, important than the level itself.

Net-short exposure to EUR/USD futures rose to a five-week high among large speculators, nearly doubling after increasing by 25k contracts over the week. Asset managers reduced net-longs by 35k, resulting in an effective combined shift of around 60k contracts towards a more bearish euro position.

Source: CFTC (COT), CME, LSEG

GBP/USD Futures Positioning | COT Report
It appears the British pound wants to head for its range lows around 1.3150, judging by how bearish momentum is accelerating towards the June low. Gross shorts have been trending higher for a couple of years, yet interestingly, net-short exposure is not flashing an imminent sentiment-extreme warning. The US dollar remains in the driving seat, though diminishing odds of a BOE hike could also decide how quickly GBP/USD breaks that June low – if it takes that route.

Source: CFTC (COT), CME, LSEG

USD/JPY Futures Positioning | COT Report
I stand by my long-held assumption that we saw the low for the Japanese yen this year back in June. While it retraced lower for a second week, a bullish hammer formed on the weekly chart, suggesting the yen is trying to form a swing low.

While large speculators and asset managers trimmed gross longs, they’re not exactly in a rush to short this market after several rounds of intervention. Both sets of traders remain net-long, which supports my ‘buy the dip’ bias for the yen and translates into a ‘fade the rally’ bias for USD/JPY.

Source: CFTC (COT), CME, LSEG

USDJPY: ⬆️ Buy

– USDJPY broke daily down channel

– Likely to rise to resistance level 160.50

USDJPY currency pair recently reversed up from the support zone located between the key support level 152.88 (which previously stopped wave (ii) in February) and the lower support trendline of the daily down channel from July.

The upward reversal from this support zone accelerated the active sub-wave iii of intermediate impulse wave (iii), breaking the resistance trendline of the down channel from July.

USDJPY currency pair can be expected to rise further toward the next key resistance level 160.30 – former top of wave b from the start of this month.

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Oil recovers above $90 amid a lack of progress in US-Iran diplomacy
Oil prices are holding onto yesterday's gains, having rebounded back above $90 a barrel and broken a five-day losing streak on Thursday. Oil had fallen 17% from cycle highs, but bears lacked the strength to hold the price below $90.

The recovery in oil was driven by a mix of geopolitical developments, including ongoing indirect talks between the U.S. and Iran on the sidelines of the United Nations General Assembly, as well as nerves over reports that the Trump administration could be preparing a 90-day ban on U.S. diesel exports to force domestic energy prices lower.

However, diplomatic talks between the U.S. and Iran have so far shown no concrete sign of progress, keeping oil prices supported. The two sides remain divided over how to bring an end to the war. While both sides agree that diplomacy should continue, Iran's president said that Tehran would never surrender to U.S. pressure.

Iran has also insisted that the Strait of Hormuz will not be reopened until its conditions are met.

Data yesterday showed U.S. crude inventories rose by 3 million barrels to 426.4 million barrels last week, defying expectations of a 641,000-barrel draw.

Attention will remain firmly focused on the Middle East, with any sense of progress towards a diplomatic solution likely to bring oil prices lower. However, in the absence of this, oil prices may continue to grind higher.

Oil forecast – technical analysis

WTI holds a constructive near-term bullish bias as the price remains above the 50 and 200 EMAs. The RSI is neutral after pulling back from overbought territory, suggesting consolidation rather than a decisive reversal.

On the upside, initial resistance is seen at $95, the 38.2% Fibonacci retracement of the move from the $55 low to the $120 high. A break above here brings $100 into focus, ahead of $105 and the September high. A rise above $105 would be needed to create a higher high and extend the bullish move.

On the downside, immediate support is seen at the 50 EMA, which is currently holding around $89, and below here at $88, the 50% Fibonacci retracement. Should sellers take out these supports, it exposes the 200 EMA around $82, followed by the 61.8% Fibonacci retracement at $80.

USD/JPY rises to 158 on widening Fed-BoJ policy outlook
USD/JPY has risen above 158, its highest level in three weeks and sharply higher from the 152 level seen earlier this month, driven by strong gains in the U.S. dollar and a widening Fed-BoJ rate differential.

Expectations for another Fed interest rate hike have jumped sharply as traders focus on persistent inflation and exceptionally strong U.S. economic activity. PMI data yesterday showed the S&P Composite PMI climbing to 58.4 in September, up from 56 in August, marking the fastest output growth rate in more than five years. This points to an economy that continues to build strong momentum.

Immediately following the data, expectations surrounding an October Fed rate hike jumped to 73% from 50% previously. U.S. yields also rose sharply, with the 10-year yield reaching a fresh 19-year high, improving the dollar's carry advantage over the yen.

Attention will now turn to more Fed speakers, U.S. jobless claims and housing starts, with the market looking for U.S. data to validate the repricing. Strong data and hawkish commentary could keep Treasury yields elevated and support the dollar, while softer data could unwind some of the move.

On the other side of the equation, the Bank of Japan raised rates by 25 basis points to 1.25% in September, its highest level in 31 years, but the decision was split by a 7-2 vote.

The BoJ offered limited guidance regarding the timing of future rate increases, failing to convince the market that it was serious about tightening monetary policy aggressively.

Japanese officials will remain alert to renewed yen weakness. With USD/JPY approaching 160, the risk of intervention could increase.

USD/JPY forecast – technical analysis

USD/JPY has extended its recovery from the 152.40 low, rising above the 200 EMA to 158.50 and testing the 50 EMA and falling trendline resistance. Buyers, supported by an RSI above 50, will look to extend gains above this area and bring attention back towards the 160 resistance zone.

On the downside, immediate support is at the 200 EMA around 157.70 and 157.20 horizontal support. A break below here opens the door towards the August low, before attention turns back towards 153, the September low.

Sellers would need to break below this level to create a lower low and extend the bearish move towards 152, the 2026 low.

Key Points:EUR/USD found itself under pressure at the start of the week. USD/CAD tested new highs as precious metals markets pulled back. USD/JPY gained ground as traders ignored the pullback in Treasury yields.

U.S. Dollar Moves Higher As Traders Stay Bullish

DXY 210926 4h Chart U.S. Dollar Index gains ground as traders react to Chicago Fed National Activity Index report. The report indicated that Chicago Fed National Activity declined from 0.08 in July to -0.04 in August, compared to analyst forecast of +0.2.

U.S. Dollar index is moving towards the resistance level at 100.50 – 100.65. In case U.S. Dollar Index manages to settle above the 100.65 level, it will head towards the next resistance, which is located in the 101.50 – 101.65 range. RSI is in the moderate territory, so there is enough room to gain momentum in case the right catalysts emerge.

EUR/USD Retreats As Traders Ignore The Pullback In The Oil Markets

EUR/USD 210926 4h Chart EUR/USD is losing ground despite the pullback in the oil markets. WTI oil declined below the $95.00 level, while Brent oil settled below the psychologically important $100.00 level.

If EUR/USD settles below the 1.1450 level, it will head towards the nearest support, which is located in the 1.1420 – 1.1435 range. A move below the 1.1420 level will open the way to the test of the 1.1400 level.

On the upside, EUR/USD needs to settle back above the resistance at 1.1500 – 1.1515. If EUR/USD climbs above the 1.1515 level, it will head towards the 50 MA at 1.1545.

GBP/USD Pulls Back As Traders Bet On Hawkish Fed

GBP/USD 210926 4h Chart GBP/USD is losing some ground as traders focus on general strength of the American currency. There are no important economic reports scheduled to be released today in the UK, so traders will stay focused on general market sentiment.

A move below the 1.3350 level will open the way to the test of the support level at 1.3285 – 1.3300. On the upside, a successful test of the resistance at 1.3400 – 1.3415 will push GBP/USD towards the 50 MA at 1.3457.

USD/CAD Attempts To Settle Above 1.4330

USD/CAD 210926 4h Chart USD/CAD tests new highs as traders focus on the pullback in precious metals markets. Other commodity-related currencies are mostly flat in today’s trading session.

EUR/USD Price Forecast

Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.

See all EUR/USD forecasts From the technical point of view, USD/CAD settled above the resistance level at 1.3985 – 1.4000 and is trying to settle above the 1.4030 level. If USD/CAD climbs above 1.4030, it will move towards the resistance level at 1.4065 – 1.4080. RSI has recently moved into overbought territory, but there is enough room to gain momentum in the near term.

USD/JPY Gains Ground As Rebound Continues

USD/JPY 210926 4h Chart USD/JPY is moving higher as traders ignore the pullback in Treasury yields. The yield of 2-year Treasuries declined towards the 4.74% level, while the yield of 10-year Treasuries settled near 4.96%.

Traders stay focused on the hawkish outlook for Fed policy. FedWatch Tool indicates that there is a 53.1% chance that Fed will raise rates at the next meeting in October.

If USD/JPY settles above the 157.50 level, it will move towards the nearest resistance level at 158.00 – 158.50. A successful test of this level will open the way to the test of the next resistance at 160.00 – 160.50. It remains to be seen whether BoJ is ready to intervene below the 160.00 level.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

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The Japanese Yen weakened despite Japan's rate hike, but Rabobank's three-month forecast rests on stronger wages and a lasting return of domestic inflation. Rabobank's three-month FX forecast puts the US Dollar to Yen exchange rate (USD/JPY) at 154.00, below Friday's close near 156.88 after a week of solid US Dollar gains.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 156.88243 (+0.46%)

Euro to Dollar (EUR/USD): 1.148572 (+0.09%)

Pound to Dollar (GBP/USD): 1.339468 (+0.29%)

The forecast was set before Friday's Bank of Japan decision, when the bank warned that an expected hike might fail to satisfy Yen buyers.

"While profit-taking on fresh long JPY positions cannot be ruled out following the BoJ meeting tomorrow, we are optimistic that the economic reforms in Japan can help sustain USD/JPY around current levels in the coming months. Our 3-month USD/JPY forecast is 154.00."

The subsequent move has made that target more demanding: the pair rose 0.46% on Friday and 2.19% over the week, leaving 154 around 1.8% below its close.

Japan's central bank voted 7-2 to raise its policy rate to 1.25%, effective from 24 September.

Governor Kazuo Ueda nevertheless said: "We don't assume a specific pace for further interest rate hikes."

That caution matched the vulnerability Rabobank had identified, while the Federal Reserve's rate increase added a competing source of support for the Dollar.

Image: USD/JPY 1-month chart Wages underpin Rabobank's case for the Yen Rabobank argues that Japan's recovery has become strong enough to support tightening without requiring an immediate acceleration in rate rises.

"Greater evidence of domestically generated inflation stemming from real wage data, a resilient economy aided by corporate Japan's involvement in the semi-conductor supply chain and stock market reforms are all JPY supportive factors."

The bank highlighted July's 2.4% annual increase in real cash earnings as evidence that stronger pay is supporting Japan's escape from decades of weak inflation.

For the 154 forecast to work, that domestic improvement must translate into renewed demand for the Yen despite higher US rates.

Friday's reaction illustrates the risk: delivering a widely expected hike offers limited currency support when investors want reassurance about the next one.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.