The Japanese Yen has temporarily halted its decline against the US dollar during Thursday’s Asian session, showing signs of stabilization after a significant retreat from recent weekly lows. Market participants remain cautious amid ongoing uncertainty regarding the Bank of Japan’s potential for upcoming interest rate hikes, which has contributed to subdued momentum in Yen gains. The release of the BoJ’s September meeting minutes reinforced expectations that the bank may consider tightening monetary policy soon, although detailed plans remain ambiguous.
Amid this environment, traders are also factoring in broader policy signals from Japan’s government. The new administration appears poised to adopt an expansionary fiscal stance, emphasizing substantial spending measures to stimulate economic growth and combat inflation. Such fiscal policies could influence future exchange rate movements by maintaining a supportive environment for the Yen or, conversely, by fueling concerns about fiscal sustainability.
Meanwhile, the US dollar continues to hold firm near its highest levels since late May, buoyed by the Federal Reserve’s hawkish stance. Recent macroeconomic data, including a stronger-than-expected rise in private employment and an increase in non-manufacturing activity, have underpinned expectations that the Fed will maintain or even tighten its monetary stance further. However, the ongoing US government shutdown introduces a layer of uncertainty, complicating the economic outlook and limiting bullish sentiment in the dollar.
In the currency pair’s technical landscape, resistance remains around the 154.40-154.45 level, which has historically acted as a barrier. A successful break above this zone could unlock potential for a move back toward the 155.00 psychological level and possibly higher. Conversely, support levels are identified near 153.65 with a key breakdown point around 153.00, below which the pair could experience a deeper correction towards 152.50 or lower. Overall, the USD/JPY remains influenced by a complex interplay of monetary policy expectations, geopolitical factors, and macroeconomic data, with traders poised for further developments in the near term.
