The USD/JPY has pulled back from a year-to-date peak of 157.83 to approximately 155.80–156.30, reflecting a decline of about 1.5–2.0 yen over the course of two sessions. The move is significant: it comes after clear intervention threats from Japan’s Finance Ministry, a notable drop in the US Dollar Index to 97.85, and increasing market belief that the Fed will implement at least a 50 bps cut in 2026, rather than the solitary cut suggested by the most recent dot plot. The pair is currently trading significantly below the 157.83 peak, with increasing downside momentum as both macroeconomic factors and technical indicators are unfavorable for the dollar. On the daily chart, USD/JPY has formed a distinct double-top at 157.83, with a neckline situated in the 154.37–154.45 range. This represents a classic bearish reversal pattern. The neckline is now the initial key target on the downside; a daily close below approximately 154.45 would confirm that the previous uptrend has been broken and create room toward 150. Momentum indicators are currently signaling caution. As the price steadily climbed to new highs above 157, both RSI and MACD began to decline, forming lower highs and establishing a bearish divergence between price and momentum. The divergence, along with the double-top, indicates a shift in trend rather than just a slight decline. As long as USD/JPY remains under 157.80–158.00, upward movements appear to indicate distribution rather than a sustainable trend continuation.
The macro backdrop in Japan now supports a stronger yen. The Bank of Japan has already raised rates by 0.25% and is indicating that further tightening may be forthcoming as inflation hovers around 3.0%. That represents a significant change in policy following years of low interest rates and extensive asset buying. Yields on Japanese bonds have reached their highest levels in years, and the BoJ is even considering the sale of over $500 billion in ETFs following the conclusion of its quantitative easing program. In this context, Finance Minister Satsuki Katayama emphasized that Japan has a “free hand” to respond to “excessive” fluctuations in the yen and assured “appropriate action.” The remarks provide the Ministry of Finance with both political and economic justification to intervene in the market should USD/JPY rise once more. Importantly, Tokyo can now assert that the yen ought to appreciate when policy tightens, and that the recent decline of the yen to 157–158 is not aligned with fundamental factors. The change in rhetoric is precisely what one anticipates before any actual or hidden intervention. The dollar component of USD/JPY is also weakening. The Fed has already cut rates three meetings in a row and currently stands in the 3.50%–3.75% range. The most recent dot plot indicates a policy rate of approximately 3.4% by 2026, suggesting only one additional cut; however, the market seems skeptical of this outlook. CME FedWatch pricing indicates a 73.8% likelihood of a minimum of 50 bps cuts in the upcoming year. There is a distinct dovish gap between the Fed’s official guidance and traders’ expectations. Macro data supports the market perspective: US unemployment has increased to 4.6%, aided by early retirement initiatives in the public sector, while inflation figures indicate that tariffs have had minimal impact on consumer prices. Current indicators of activity remain positive – Q3 GDP is projected at 3.2% following 3.8% in Q2 – however, the trend is showing a slowdown rather than an increase. Some Fed officials, like Stephen Miran, openly warn that maintaining elevated rates could lead to a recession, while others, such as James Williams in New York, contend there is “no urgency” to implement cuts. The internal division highlights an important aspect for FX: the next significant policy surprise is more likely to lean dovish rather than hawkish for the dollar. With the DXY already at an 11-week low around 97.85, each new soft data point adds pressure on USD/JPY from the USD side.
The rise in precious metals indicates the strain on the greenback, which is now beginning to be mirrored in USD/JPY. Gold has surged to approximately $4,497.86 per ounce, surpassing the $4,400 mark for the first time ever and achieving around 70% gains year-to-date, marking the second-best performance in modern history after 1979. Silver has surpassed $70 per ounce for the first time, establishing new records. These actions are interconnected. ETF gold holdings at the SPDR trust have increased by more than 12 metric tons in just one day, reaching 1,054.56 tons, the highest level observed since mid-2022. Broader gold ETFs possess approximately 3,932 tons, having seen an addition of 700 tons in the first 11 months of the year, largely influenced by late-autumn inflows from China. Investors are clearly moving towards hard assets to protect themselves from policy uncertainty, geopolitical risks, and a weakening dollar. A weaker USD index results in lower prices for dollar-priced metals for non-US buyers, enhancing the flow. For USD/JPY, a scenario where gold approaches $5,000 and silver aims for $75 is typically not one where the dollar tends to strengthen, particularly as rate expectations are declining. The euro’s movements introduce additional strain on the dollar aspect of USD/JPY. EUR/USD has bounced to approximately 1.1780, marking its highest level in a week, following a 0.45% gain in the previous session. This situation persists despite the European Central Bank maintaining its key rate at 2.15%, the lowest level since October 2022, and keeping policy steady for four consecutive meetings. Currently, the markets reflect a probability of less than 10% for an ECB cut in February 2026.
The probability distribution here contrasts significantly with that of the Fed, where traders are actively wagering on more substantial easing. In other words, the US is moving from “higher for longer” to a more accommodating approach, while the ECB and BoJ have limited capacity or urgency to make further cuts. This uneven adjustment indicates that the dollar may decline at the same time against both the euro and the yen. For USD/JPY, that combination amplifies downside risk: if EUR/USD is firm and USD/JPY is rolling over, EUR/JPY will bear more of the adjustment when Tokyo intervenes, but the dollar still loses altitude across the board. The US energy sector is yet another dynamic factor influencing the broader narrative that USD/JPY is beginning to reflect. In the first nine months of 2025, domestic households incurred approximately $12 billion more in natural gas expenses compared to the previous year, translating to about $124 per family, despite political assurances that energy bills would decrease. One driver is record LNG exports: existing terminals now consume more gas than the 73 million US households that use natural gas, and about 25% of US production is exported via LNG or pipelines. With the expansion of export capacity and policies supporting “energy dominance,” domestic gas prices are likely to experience structural upward pressure. Simultaneously, reverting fuel-efficiency standards from a target of 50.4 mpg by 2031 to approximately 34.5 mpg increases long-term fuel demand and complicates future emissions reductions. In the short run, the Fed is reacting more to slowing growth, rising unemployment, and stable CPI rather than to these medium-term inflation concerns, which explains the dovish repricing and the weakness of the dollar. However, from a structural perspective, elevated energy and utility expenses constrain the extent to which real yields can decrease over the long term. The combination of a short-term dovish Federal Reserve and a medium-term inflation floor indicates a cyclical downturn for USD/JPY at this moment.
However, there remains the possibility for another phase that could support the dollar in the future as markets adjust to the risks associated with energy. The present configuration of USD/JPY is characterized by three distinct zones. Initially, resistance: 157.80–158.00 is now a distinct barrier, indicating the double-top region. As long as the price remains below, the most likely direction is downward. A daily close above 158 would indicate that intervention threats and the double-top have not succeeded. Second, the neckline: 154.37–154.45 serves as the initial significant support level. This level corresponds with the breakdown line of the double top and the previous consolidation base. A decisive move and a close beneath this range would trigger the complete pattern objective. Third, the psychological floor: 150.00. Considering the magnitude of the previous movement and the gap from the neckline, 150 stands as a feasible medium-term target if the bearish formation materializes and the anticipated Fed cuts are implemented. On the intraday tape, USD/JPY is already under pressure around 155.80, down about 0.75% on the day, with the dollar index at 97.85 and risk sentiment tilted toward safe-haven metals. Intervention discussions from Tokyo introduce an additional layer of downside risk: even if technical support remains intact at 154.50 during the initial test, any resurgence toward 157 might prompt real selling from the MoF instead of mere verbal intervention.