USD/JPY Hits February High as Dovish Policy Expectations Weigh on Yen

By RoboForex Analytical Department

The USD/JPY pair has rallied to its highest level since February, trading around 152.45. The Japanese yen has depreciated by over 3% this week, with selling pressure intensifying following the release of soft wage data. This has significantly dampened market expectations for further interest rate hikes from the Bank of Japan (BoJ).

The underlying driver is a persistent squeeze on household budgets: real incomes in Japan fell by 1.4% year-on-year in August, the eighth consecutive monthly decline. This confirms that price growth continues to outpace wage earnings.

While BoJ Governor Kazuo Ueda has previously signalled the regulator’s readiness to resume hiking rates should the economy and inflation align with forecasts, he has also highlighted risks from potential US trade tariffs.

On the political front, investors are assessing the implications of Sanae Takaichi’s victory in the leadership race. As a known supporter of the Abenomics stimulus programme, her election has bolstered expectations of large-scale budget injections and the continuation of an accommodative monetary policy stance.

Technical Analysis: USD/JPY

H4 Chart:

On the H4 chart, USD/JPY is advancing towards the 153.00 resistance level. Upon testing this level, a corrective pullback towards 151.28 is a plausible scenario. Following such a correction, the potential for a further upward move to 155.69 would be in view, with a longer-term trend objective at 156.90. This bullish outlook is technically supported by the MACD indicator, whose signal line is positioned above zero and pointing sharply higher.

H1 Chart:

On the H1 chart, the market has fulfilled its short-term growth target at 152.62. For the current session, we anticipate a minor decline to the 151.61 support level, which may be followed by another attempt to rise towards 153.00. This intraday view is corroborated by the Stochastic oscillator. Its signal line is currently below the 80 mark and is turning downwards towards 20, suggesting a brief consolidation before the next potential leg higher.

Conclusion

Fundamentally, the yen remains under pressure from weak domestic data and political signals that favour continued stimulus, reducing the likelihood of a near-term policy shift from the BoJ. Technically, the path of least resistance remains upwards, with key resistance at 153.00. A successful break above this level could open the door for a further significant advance, though short-term corrections should be expected within the broader bullish trend.

Disclaimer:

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.