USD/JPY slipped to 157.94 on Friday after a notable advance the day before. The yen is gaining some support from Tokyo’s inflation figures, where core inflation rose to 2.7% in September, surpassing the Bank of Japan’s 2% target for the first time in nine months.
Meanwhile, the Bank of Japan’s summary of opinions from its September meeting turned out to be less hawkish than anticipated. Policymakers are paying closer attention to the risk of inflation overshooting the target, which leaves the door open for another rate increase before year‑end, though no concrete timing was provided.
Still, the yen is on course for a third straight weekly drop. A robust US dollar and heightened US Treasury yields continue to pressure the Japanese currency, especially as markets anticipate that the Federal Reserve may keep tightening policy amid rising energy costs that fuel inflation.
Consequently, the interest‑rate gap between the United States and Japan could stay wide, given that the Federal Reserve has tightened policy more aggressively than the Bank of Japan. Combined, these dynamics curb the yen’s chances of a lasting rally.
Technical Analysis
On the four‑hour USD/JPY chart, the pair bounced from the 156.20 level, built upward momentum and challenged resistance between 158.75 and 158.99. Buyers could not hold above that band, sending the price into a consolidation around 157.85. The setup leaves room for another push toward the 158.75‑158.99 zone, a key resistance level where a retest from below is plausible. While the MACD stays above zero, its momentum is muted, indicating the advance is largely corrective. A break below 158.75‑158.99 could spark a fresh decline toward 157.34, and if that level fails, further down to 155.60. The 153.50 region remains an additional downside target.
On the hourly USD/JPY chart, after climbing to 158.40 the pair retreated and found resistance again near 157.93. The Stochastic oscillator is trending downward and nearing oversold territory, hinting at a possible short‑term bounce before the downtrend resumes. The immediate session range sits between 157.75 and 157.93. A move back above 157.93 could set the stage for a rebound toward 158.40 and then the 158.63‑158.99 band. Even though the 158.99 level has not yet been broken, the prevailing view is that the corrective bounce will finish and the price will turn lower. A slip under 157.75 would intensify selling pressure, paving the way to 157.34 and then 155.60. Thus, the bearish outlook remains dominant once the current correction ends.
Conclusion
The yen is trying to claw back some of its recent losses, buoyed by stronger‑than‑expected Tokyo inflation data that pushed core inflation above the Bank of Japan’s 2% target for the first time in nine months. Nevertheless, the BoJ’s September meeting minutes were less hawkish than anticipated and gave no clear indication of when the next rate increase might come. The currency remains on track for a third straight weekly drop, pressured by a firm US dollar, elevated US Treasury yields and the enduring US‑Japan interest‑rate gap.
From a technical standpoint, USD/JPY may experience another corrective bounce toward the 158.75‑158.99 resistance zone. However, as long as the pair stays below 158.99, the primary expectation is a subsequent reversal toward 157.34, with the downside possibly reaching 155.60. The 153.50 level continues to serve as an additional downside target.
