The USD/JPY pair is currently positioned between 153.0 and 153.3 following a tumultuous month that saw the exchange rate surge from approximately 139 in April of the previous year to the 159–160 range, before experiencing a decline of about 4% from this year’s peak. The recent shift has brought back authentic foreign exchange volatility following an extended period of calm. The rise above 159.0 on 23 January followed by a swift decline to 154.0 and then 152.1 was not merely a fluctuation in price; it conveyed a clear policy message directed at leveraged longs who had perceived the yen as a consistently favorable funding currency. Price movement observed between 23–26 January indicates significant official selling activity of USD/JPY. The pair momentarily exceeded 159.0 once more on 23 January, only to face a strong wave of selling that brought it down to the 154.0 area by 26 January, ultimately reaching a low of 152.10 this week. Source observes significant market discussions regarding the Bank of Japan’s activities, indicating that it was engaged in selling dollars and purchasing yen, alongside further speculation that US authorities supported this action. US Treasury Secretary Bessent has not refuted those reports, which strengthens the notion that 159–160 has become a politically sensitive area. Japan is keen to avoid a repeat of a speculative surge in USD/JPY, while the US is disinterested in facing criticism for causing chaotic fluctuations in the currency of an important ally.
The significant rise in USD/JPY from 139 to 160 over the past year occurs against a domestic Japanese backdrop that is notably atypical. Under the leadership of Prime Minister Sanae Takaichi, Tokyo has initiated another significant stimulus program and is transparently strategizing additional fiscal support, which may include tax reductions contingent upon her success in the February election. This contributes to apprehensions regarding the sustainability of long-term debt and maintains downward pressure on the yen. Simultaneously, her more stringent position regarding China, which includes a commitment to assist Taiwan in the case of an assault, introduces geopolitical risk to a nation that continues to depend significantly on imported energy and trade with Beijing. The interplay of assertive fiscal measures, geopolitical strains with a key trading ally, and a history of exceptionally lax policy is what drove the market to challenge 160 initially. The Bank of Japan has made structural changes, yet these adjustments have not sufficiently closed the rate gap. The bank has raised policy rates to their peak in approximately 30 years and is indicating a readiness to tighten further, marking a significant departure from the previous yield-curve-control framework. In contrast, the Federal Reserve has maintained the funds rate within the 3.50–3.75% range and has indicated that while inflation is still high, the labor market has softened sufficiently to warrant potential rate cuts later this year. Powell’s tone positions June as the more plausible initial timeframe instead of April. The interest-rate spread that previously bolstered USD/JPY during its ascent is no longer expanding and could begin to contract as the US implements cuts while Japan gradually raises rates from their lowest point. In the medium term, the outlook suggests a USD/JPY rate lower than 160, even in the absence of intervention.
Short-term flows are influenced significantly by risk sentiment in addition to rates. A source observes that the Nasdaq 100 experienced a modest increase of 0.17%, whereas the S&P 500 and Dow remained unchanged following the Fed’s decision. Subsequently, the technology sector faced a significant downturn later in the week, highlighted by Microsoft’s nearly 12% decline. This level of equity volatility drives investors away from popular growth trades and towards more defensive positions. Historically, the yen tends to gain from de-risking waves, even in the face of weak Japanese fundamentals. The same session observed gold increasing approximately 2.7% to reach new highs, silver advancing to around $120.47 with a target approaching $125, and oil hitting four-month peaks. This indicates that capital is shifting towards hedges and hard assets as the US dollar index stabilizes instead of experiencing a surge. In that context, a stronger yen and a USD/JPY decline from 159 toward the low-150s aligns with the broader macroeconomic landscape. From a technical perspective, USD/JPY has experienced a clear downside reversal. The Invezz piece notes a decline from approximately 159.40 to 153, indicating a correction of around 4% that has pushed the pair beneath a significant horizontal level at 154.3, which represented the low in December. The pair is currently fluctuating around 153.325 following the intervention shock, as noted by Source. IG identifies this week’s 152.10 low as the primary support level, with 151.54, the late-October trough, positioned as the subsequent level to watch if the initial support is breached. A live coverage indicates that intraday trading is situated between 152.70 and 153.00, with the pair experiencing a decline of approximately 0.3% for the day, influenced by a sell-off in US equities and an increase in safe-haven demand for the yen. The essential takeaway from this situation is that the market has transitioned from consistently purchasing dips to scrutinizing the potential for further gains above the 155–156 range.
The daily chart structure has become significantly less favorable for bullish positions. Invezz observes that USD/JPY has breached the 23.6% Fibonacci retracement level from the 139–160 advance and is currently indicating a potential move toward the 50% retracement near 150, which serves as a reasonable downside target. The pair has also fallen below its 50-day and 100-day exponential moving averages, eliminating the trend-following support that sustained it during the fourth quarter. IG identifies the 154.05–154.95 range as a significant resistance zone during the upward movement; provided that the spot remains under approximately 154.95, their short-term outlook remains negative. On the medium-term horizon, the structure is characterized as toppish while USD/JPY remains below the 159.45 region that limited the previous spike. Source establishes a speculative range for February, positioning the lower boundary around 150.01 and the upper boundary at approximately 156.60. This aligns with the notion of a wider yet lower trading corridor compared to the recent peak of 160.
The current market exhibits a notable technical tension. Invezz indicates that USD/JPY is exhibiting a bearish flag or pennant pattern following a downward break, which generally leads to an additional decline toward the subsequent Fibonacci level around 150, assuming resistance remains intact. Simultaneously, intraday analysis indicates that the pair is forming consecutive bullish harami candles on the daily chart, a pattern frequently observed at the conclusion of a downward trend, suggesting a possible rebound if validated. For the bullish pattern to be significant, USD/JPY must regain and maintain a position above approximately 155.00. Present scenario in which a breakthrough at 155.00 could lead to a retest of the January 23 peak around 159.22 and, in a more extreme case, a renewed attempt at the 160.00 psychological level, with new intervention risks looming in that area. On the downside, both FXStreet and IG align around 152.09–152.10 as the critical level; a decisive break there would invalidate the bullish harami pattern and swiftly bring 150.00 into consideration.