USD/JPY Price Forecast – Dollar-Yen Rebounds Toward 154.00 as U.S. Data Beat Expectations and Yields Surge

USD/JPY (JPY=X) Rebounds as Strong U.S. Data Revives Dollar Demand

USD/JPY trades around 153.90, recovering from Tuesday’s low of 152.00, after robust U.S. economic figures reignited dollar strength. The ISM services PMI climbed to 52.4, up from 50.8, while the ADP employment report showed a gain of 25,000 jobs versus a prior –32,000. The data reinforced optimism over U.S. economic resilience and sent 10-year Treasury yields to 4.143%, their highest in three weeks. Rising yields widened the rate differential with Japan, driving renewed demand for the greenback.

BoJ Minutes Confirm Dovish Caution as Yen Momentum Fades

The Bank of Japan minutes revealed board hesitation to accelerate tightening, citing risks from weak domestic consumption and global trade tensions. Two members advocated a modest rate increase to 0.75%, but the majority maintained the benchmark at 0.50%, marking a fifth consecutive hold. While Governor Kazuo Ueda signaled that December could host the next possible hike, markets remain unconvinced, with probability of action only 60%, up slightly from 50% last week.

Japanese top FX diplomat Atsushi Mimura warned that yen moves “deviate from fundamentals,” echoing 2022 and 2024 intervention levels near 154.50–155.00, but traders doubt unilateral action without U.S. cooperation. The yen’s short-term support from safe-haven flows has eroded as equities stabilize and U.S. macro surprises continue.

Technical Setup: USD/JPY Maintains Bullish Channel Above 153.00

Price structure remains decisively bullish, forming higher highs and higher lows since mid-September. The pair earlier touched 154.30, retesting resistance at the October 30 swing zone (154.44–154.48). A sustained close above that band could target 154.85, the February 13 high, followed by 155.30, the 127.2% Fibonacci extension of last week’s rally. On the downside, 153.00 serves as the pivotal support, overlapping with the 61.8% retracement and lower channel boundary. A break beneath 152.20 would signal a corrective slide toward 151.00, but momentum indicators suggest dips remain buyable as long as yields hold above 4%. RSI trades near 57, maintaining positive slope, while MACD histogram prints fresh bullish divergence.

Macro Drivers: Fed Uncertainty, Shutdown Drag, and Safe-Haven Rotation

With the U.S. government shutdown entering its fifth week, traders lack official economic releases, making private data like ADP and ISM more influential than usual. The Dollar Index (DXY) holds near 100.20, close to a three-month high, while futures pricing now implies less than a 35% chance of a Fed rate cut in December, down from 55% last month. The shift has bolstered the greenback across G10 peers.

Meanwhile, Japanese yields remain pinned near zero, with 10-year JGBs trading at 0.79%, widening the real rate gap beyond 330 basis points compared with the U.S. 10-year Treasury. That differential remains the dominant engine behind USD/JPY strength despite intermittent bouts of risk aversion that briefly lift the yen.

Positioning and Market Sentiment

CFTC data show net speculative longs in USD/JPY rising for the fourth consecutive week, up 11% to 42,000 contracts, their highest since June. Implied volatility has eased to 8.3%, signaling confidence in trend continuation rather than an imminent reversal. Options desks report heavy demand for 155.00 call strikes, suggesting traders see potential intervention as a secondary—not primary—risk.

Key Levels to Watch

Immediate resistance remains 154.30–154.50, followed by 154.85 and 155.30. Major supports lie at 153.00, 152.20, and 151.00. A close above 155.00 would confirm breakout momentum toward 156.75, last seen in early 2024. On a four-hour chart, the 50-period EMA sits near 153.45, aligning with intraday support and validating bullish structure.

Outlook and Bias

The combination of resilient U.S. macro data, persistent yield divergence, and the BoJ’s ultra-cautious stance leaves USD/JPY skewed to the upside. Unless U.S. data deteriorate sharply or Tokyo intervenes directly, dips toward 153.00 are expected to attract buying interest.

Verdict: Bullish Bias – Buy on Pullbacks Toward 153.00, Target 155.00–155.30

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