USD/JPY breakdown as Dollar loses ground to Yen

• USD/JPY retreats as yield spreads narrow, tilting flows back toward the yen.
• Shifts in policy tone fuel selling pressure, with upside attempts capped at 148.50.
• Support at 148.20 gives way, confirming a breakdown toward deeper liquidity.

USD/JPY breakdown: From resistance to reversal

USD/JPY has shifted tone in recent sessions, with momentum flipping from attempted breakouts to downside continuation. The dollar’s strength stalled just as the yen found renewed demand, resulting in a sharp pullback.

The turning point came at the 148.448–148.501 H4 Fair Value Gap (FVG), where price was rejected on retests of higher ground. This imbalance acted as resistance, fueling supply-driven momentum and accelerating the decline. Now trading below 148.20, the pair has confirmed a support break, leaving sellers firmly in control in the short term.

BoJ stance adds weight to the Yen

The Bank of Japan’s evolving stance has provided a supportive backdrop for yen appreciation. While the central bank has kept its benchmark rate at 0.50%, policymakers are no longer purely dovish:

• Internal dissent on the BOJ board has already raised the possibility of lifting rates to 0.75% in the near term.
• The BOJ has begun reducing its massive ETF and J-REIT holdings — a clear step away from years of aggressive stimulus.
• Policymakers such as Noguchi now stress that the “need for rate hikes is rising more than ever,” underscoring a cautious hawkish tilt.

This shift contrasts with the Fed’s cautious easing path and has amplified yen strength, making the recent USD/JPY breakdown more pronounced.

Why USD/JPY now faces headwinds

The current decline reflects a combination of structural and technical pressures:

• Yield spreads have narrowed, softening dollar advantage.
• Rejection at the 148.448–148.501 FVG highlighted supply dominance.
• Support at 148.20 failed, leaving price exposed to deeper downside liquidity.

This does not necessarily mark a full reversal of the long-term trend, but it highlights how corrective legs can extend when key supply zones hold.

Technical outlook: USD/JPY

USD/JPY continues to consolidate beneath 148.30, with the 148.448–148.501 FVG now the critical pivot zone. How price reacts to this imbalance will dictate the next leg.

Bullish scenario: Reclaim of FVG aone

If buyers reclaim the 148.448–148.501 imbalance, it would signal absorption of supply and a potential shift in momentum. A clean close above flips the FVG into demand.

• Upside targets: 148.70–148.90, with scope to retest 149.20–149.50.
• Confirmation requires higher-timeframe closes holding above 148.50.
• This recovery setup suggests base-building for a rebound after the breakdown.

Bearish scenario: Rejection at FVG, continuation lower

If price retests the 148.448–148.501 H4 FVG and sellers defend it, the imbalance acts as supply. This rejection would confirm continuation of the bearish sequence.

• Downside targets: 148.00, followed by deeper liquidity at 147.70–147.50.
• As long as price is capped beneath the FVG, momentum remains bearish.
• Rallies are likely to be corrective within a broader downside leg.

Conclusion

USD/JPY has lost traction as the dollar weakens against the yen, with the 148.448–148.501 H4 FVG acting as a decisive resistance zone. The breakdown below 148.20 confirms sellers’ grip, with focus shifting toward 147.50 if supply holds. Only a reclaim of the imbalance can neutralize the bearish outlook and open recovery back toward 149.00+.