USD/JPY Price Forecast: Pair Holds 150.60 as BoJ Policy Doubts and Fed Blackout Keep Yen Under Pressure

USD/JPY Price Forecast - Yen Holds 150.60 as Leadership Shift in Japan and Fed Policy Uncertainty Define Market Momentum

The USD/JPY pair is steady near 150.60, maintaining a bullish structure as traders digest Japan’s historic political shift and the extended U.S. government shutdown. The appointment of Prime Minister Sanae Takaichi, Japan’s first female leader, has triggered new speculation over the Bank of Japan’s (BoJ) policy direction, with markets anticipating a delay in rate normalization. This comes as the Federal Reserve remains in blackout mode ahead of its next meeting, leaving macro signals subdued. The pair trades just above its 20-day Simple Moving Average at 150.14, a level that has repeatedly served as technical support through October. The USD/JPY has rallied nearly 0.5% since Friday’s low of 149.37, supported by widening policy divergence between the BoJ and the Fed.

BoJ Policy Uncertainty Intensifies After Takaichi’s Election Victory

Political developments in Japan have become a defining catalyst for the yen’s weakness. The Liberal Democratic Party and the Japan Innovation Party (Ishin) agreed to form a coalition government, handing Takaichi control of the lower and upper houses, though still short of the 233-seat majority needed for unrestricted legislation. Investors interpret her expansionary stance as a signal that the BoJ could postpone tightening, maintaining negative real rates longer than previously expected. BoJ Board Member Hajime Takata confirmed this view on Monday, stating that Japan has “roughly achieved” its 2% inflation target, while Deputy Governor Shinichi Uchida reiterated that policy normalization will remain data-dependent. The combination of stable inflation and political support for looser fiscal stimulus has kept the yen under pressure, reinforcing bullish sentiment in USD/JPY.

Federal Reserve Blackout and U.S. Shutdown Limit Dollar Volatility

In the United States, macro visibility remains limited by the ongoing government shutdown, now entering its third week, and the Fed’s pre-meeting blackout period. Despite the lack of new data, market expectations have stabilized around a dovish bias: futures markets via CME FedWatch Tool fully price in 25-basis-point rate cuts at both the October and December FOMC meetings. The prospect of lower U.S. rates has capped some of the dollar’s upside, but the yen’s underperformance continues to dominate. The U.S. Dollar Index (DXY) trades near 96.20, up 0.32%, showing resilience despite political gridlock. Traders note that the lack of hawkish communication has not deterred bullish positioning in USD/JPY, with intraday demand emerging near 150.50–150.45, a critical pivot zone aligned with the 23.6% Fibonacci retracement of October’s rally.

Technical Structure Shows Bulls in Control with 151.75 Resistance in Sight

The technical configuration remains favorable for USD/JPY buyers. The pair has printed three consecutive bullish daily candles, confirming the strength of the rebound from last week’s lows. A sustained move above 151.00 would pave the way for a test of the 151.75 confluence zone, which aligns with the 61.8% Fibonacci retracement of the recent correction and the 200-hour SMA. If this resistance breaks, the next upside targets stand at 152.00 and 152.25, with a potential extension toward 153.00, matching the October 10 high. On the downside, firm support rests at 150.00, followed by 149.35, the intraday trough that halted last week’s slide. A break below 148.45–148.40 would flip momentum toward a short-term correction, but current price action suggests consolidation above 150 remains the dominant trend.

Market Sentiment Favors Yen Weakness Amid Global Risk Appetite

Global risk sentiment remains constructive, reducing demand for safe-haven assets like the yen. Asian equity markets have extended gains following Takaichi’s confirmation, while U.S. futures trade mixed as earnings season continues. The Nikkei 225 is up 0.8%, marking its third consecutive session of recovery, supported by exporters benefiting from a softer yen. In currency markets, the yen remains the weakest performer of the week, down 0.12% against the New Zealand dollar and 0.07% versus the euro. The yen’s slide reflects sustained capital flows out of Japan, with domestic investors seeking higher yields abroad. As Japan’s inflation has held above the BoJ’s 2% target for over three years, policymakers face increasing pressure to balance growth with currency stability — a challenge that has amplified the USD/JPY’s bullish tone.

Global Geopolitical Dynamics Add Layers to USD/JPY Outlook

Beyond Japan, geopolitical events are influencing capital flows. U.S. President Donald Trump’s comments ahead of his meeting with China’s President Xi Jinping signaled potential tariff escalation if talks fail, keeping traders cautious about risk exposure. Meanwhile, reports of Ukrainian drone strikes on Russian gas infrastructure injected volatility into energy markets, indirectly strengthening the dollar through higher demand for U.S. assets. In Europe, expectations of a peace deal between Ukraine and Russia have tempered risk-off sentiment, but uncertainty persists. The combination of strong U.S. dollar fundamentals and Japan’s accommodative stance has pushed USD/JPY toward levels unseen since October 2022, when the pair briefly breached 151.90 before the BoJ intervened. Market participants now debate whether Tokyo will again step in to slow depreciation if USD/JPY crosses 152.00, though the Ministry of Finance has remained silent so far.

Short-Term Forecast: Consolidation Before Breakout Toward 152.00–153.00 Zone

Momentum indicators point to continued consolidation before a potential breakout. The RSI hovers around 58, reflecting moderate strength without signaling overbought conditions. The MACD histogram continues to widen positively, suggesting sustained upside momentum. Option markets show skew toward higher strikes, with one-week implied volatility at 9.1%, up from 8.4% last week, implying traders are positioning for possible BoJ-related volatility. Near-term forecasts anticipate a range between 150.00 and 151.75, with bias tilted upward as long as support holds above 149.30.

USD/JPY (JPY=X) Outlook: Bullish Bias Reinforced by Policy Divergence and Technical Strength

The divergence between Japan’s dovish monetary path and the Fed’s relatively tighter stance remains the core driver behind USD/JPY’s strength. The confirmation of Takaichi’s government has revived fiscal stimulus hopes, while U.S. policymakers are constrained by domestic politics and slowing inflation momentum. This policy gap is unlikely to close before year-end, making yen weakness the prevailing theme.

Verdict: Buy — Target Range 151.75–153.00 (Short-Term), Stop-Loss 149.30
Based on the alignment of macro factors, technical structure, and persistent yield differentials, USD/JPY maintains a bullish bias heading into late October. A sustained break above 151.75 could open the door to a multi-year high test at 153.00, while downside risk remains limited as long as 149.30 holds.

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