USD/JPY opened the week around 157.48, after the yen posted three straight days of gains. The move followed the Bank of Japan’s decision to keep its policy rate unchanged at 1.25%, as anticipated.
More importantly, the BoJ signaled that core inflation has now reached its 2% target, fuelling market speculation that a rate increase could come as early as December.
The policy decision passed by an 8‑1 vote. Board member Hajime Takata argued for an immediate hike to 1.5%, citing a shift in economic conditions that now demand a swifter shift toward a neutral stance.
The yen also benefited from heightened safe‑haven demand after weak earnings from major technology firms reignited concerns over AI investment spending and triggered another equity market downturn.
Adding further support, global asset managers have returned to Japan’s bond market. Stronger domestic demand and higher yield expectations under a tighter monetary policy outlook are bolstering the currency.
Technical Analysis
On the four‑hour chart, USD/JPY continues to display a corrective upward pattern after pulling back to 156.07. Buyers pushed the price back toward 157.98, but a descending resistance line is capping further upside. A minor pullback to around 157.38 is anticipated before the advance resumes. The immediate upside target sits at 158.08; breaking above this level would open the door to 159.16. Over the medium term, the pair is aimed at 160.08. The MACD histogram is narrowing and the signal line is sloping lower, suggesting a possible short‑term decline before the upward momentum resumes.
On the hourly chart, USD/JPY formed a local peak at 157.98 and is now correcting lower. The current correction is expected to test the 157.46–157.38 support zone. If price holds above 157.14, the dip could be viewed as an intermediate retracement within a fresh upward wave. After the pullback, a rebound toward 158.08, then 158.63 and 159.16, is projected. The Stochastic oscillator has exited the overbought area and is pointing down, reinforcing the short‑term corrective outlook.
For Monday, the predominant view is that the decline will end near 157.38, after which the upward move is likely to resume. A breach above 158.08 would reinforce bullish momentum. Conversely, a break below 157.14 would weaken the current stance and could expose the pair to a test of 156.07.
Conclusion
Overall, USD/JPY remains under pressure as the yen benefits from the Bank of Japan’s inflation signal and the prospect of a December rate hike, underscored by an 8‑1 vote split and one member’s call for a 1.5% rate. Safe‑haven flows and renewed global investor interest in Japanese bonds provide additional support. Technically, the pair is in a corrective phase within a broader uptrend, with key support at 157.38 and 157.14 and resistance at 158.08. Breaking above 158.08 would target 158.63, 159.16 and eventually 160.08, while a drop below 157.14 could open the way to 156.07. The near‑term direction will depend on whether the current correction holds or deepens.
