The US Dollar is inching higher against the Japanese Yen, approaching the 155.00 level—its highest point in eight months. However, bullish momentum is showing signs of exhaustion. Pressure on the Bank of Japan (BoJ) to maintain near-zero interest rates, fading expectations of Federal Reserve rate cuts, and escalating geopolitical tensions between Japan and China are all weighing on the Yen at the start of the week.
Cautious market sentiment is also supporting the Dollar, with investors hesitant to take positions against it ahead of a series of delayed US economic releases. This has kept USD modestly stronger against most major currencies.
Technical Analysis: USD/JPY Forms an Ending Wedge Pattern
A look at the four-hour chart shows USD/JPY trading within an increasingly narrow range after gaining roughly 5.5% since early April. This structure resembles an ending wedge, a chart pattern that typically signals slowing upside momentum and often precedes a corrective move lower.
- Resistance: Initial resistance awaits near 155.00, followed by the wedge top at 155.15. A further extension could target the 127.2% Fibonacci level of the November 6–12 rally at 155.65.
- Support: Immediate support sits at the wedge trendline near 154.00. A break below this zone would expose the December 11–14 lows at 153.65. Should selling accelerate, the November 6 low at 152.85 and the October 22 & 29 lows near 151.60 come into focus.
Japanese Yen FAQs
What drives the Japanese Yen?
The Yen’s value is shaped by Japan’s economic conditions, Bank of Japan (BoJ) policy, US–Japan yield differentials, and global risk sentiment.
How does BoJapan policy influence the Yen?
The BoJ’s mandate includes currency stability. While it rarely intervenes directly, its ultra-loose monetary stance between 2013 and 2024 contributed significantly to Yen weakness. The gradual unwinding of those policies has recently offered the Yen some support.
How do US–Japan yield spreads affect USD/JPY?
For years, the BoJ’s near-zero rate policy widened yield differentials with the US, boosting the Dollar against the Yen. As global rate cycles shift and the BoJ slowly normalizes policy, this gap is narrowing.
How does market risk sentiment impact the Yen?
As a traditional safe-haven asset, the Yen tends to strengthen during market turmoil and weaken when risk appetite improves.
