USD/JPY Buyers Target Three-Month High as Yen Weakens

Market Overview

The USD/JPY currency pair saw heightened activity on Wednesday as investors responded to developments related to U.S. trade policy under the potential second term of Donald Trump. Trump’s familiar rhetoric on trade tariffs has led to renewed concern for Japanese exporters, particularly at a time when Japan’s economic stability relies heavily on external support to maintain growth momentum. These concerns, coupled with increased risk aversion, have weakened the yen against the U.S. dollar. As a result, USD/JPY managed to erase losses from the previous week, signaling renewed strength for the dollar.

Technical Analysis

From a technical standpoint, USD/JPY has approached a critical level on the daily chart, with buyers testing the resistance at 153.875. This price level represents a key inflection point, as it marks the upper limit of the pair’s rally that commenced on September 16. A decisive break above this resistance would open the door for further gains, targeting subsequent levels at 154.582, 155.481, 156.473, and eventually 157.180.

On the other hand, a failure to break through the 153.875 resistance level would embolden sellers, putting the focus back on the support levels at 152.883 and 151.277. A bounce from these levels could provide some consolidation opportunities before the next move, while a break below these levels would suggest an increased likelihood of a broader retracement.

Oscillators and Momentum Indicators

Current oscillator readings present a mixed picture. The RSI remains in bullish territory, hinting at sustained buying interest as momentum builds up. Meanwhile, the MACD is also signaling upward momentum, though it presents a more cautious stance with a flat histogram. Moving averages further corroborate the bullish outlook, reflecting the recent upward movement, but also suggesting potential caution if resistance levels prove too challenging to break.

Key Events to Monitor

Investors are keeping an eye on several significant events that could influence USD/JPY in the near term. The minutes of the Bank of Japan‘s latest meeting indicated that policymakers remain cautiously optimistic about Japan’s economic recovery and see opportunities for future rate hikes. This news has already prompted a reaction in U.S. Treasury yields, with the focus now turning to the upcoming 30-year Treasury bond auction on Wednesday. The outcome of this auction, along with ongoing U.S. election developments, could significantly impact the direction of U.S. yields, thereby affecting USD/JPY price action.

Key Resistance and Support Levels

Resistance Levels:

• Resistance 1: 154.582
• Resistance 2: 155.481
• Resistance 3: 156.473
• Resistance 4: 157.180

Current Price: 153.916

Support Levels:

• Support 1: 152.883
• Support 2: 151.277

Conclusion

USD/JPY is testing a critical resistance at 153.875 as buyers attempt to extend the upward rally. A break above this level would pave the way for further gains, while failure to do so may see sellers taking advantage of nearby support levels to reassert control.