USD/JPY climbs to fresh nine-month high

The USD/JPY pair advanced to 154.36 on Tuesday, edging closer to a new ten-month peak. The rally was driven by growing market optimism that the protracted US government shutdown may soon conclude, dampening demand for traditional safe-haven assets like the Japanese yen.

In Japan, Economic Recovery Minister Minoru Kiuchi highlighted the domestic challenges posed by the currency's weakness, warning that a soft yen risks amplifying inflationary pressures by increasing the cost of imports. He called for vigilant monitoring of the situation.

Concurrently, a draft of the government's new economic stimulus plan—scheduled for approval on 21st November—reveals that Prime Minister Sanae Takaichi's cabinet will urge the Bank of Japan to prioritise economic growth alongside price stability. The programme is also set to feature tax breaks and investment incentives targeting 17 key industries.

This comes as the Bank of Japan's October report reaffirmed its close watch on wage growth to determine the timing of its next potential rate hike. In a positive economic sign, the country registered a record current account surplus of ¥4.5 trillion in September, bolstered by robust export growth.

Technical analysis: USD/JPY

Four-hour chart

On the H4 chart, USD/JPY has formed a consolidation range around 153.80. We anticipate an upward expansion of this range towards 154.80. Following this, a pullback to retest the 153.80 level from above is expected. This would likely set the stage for the next leg of the uptrend, targeting 155.70. This bullish scenario is technically confirmed by the MACD indicator, whose signal line is firmly above zero and pointing upwards, indicating sustained positive momentum.

One-hour chart

On the H1 chart, the pair has completed an initial growth impulse to 154.48. A near-term correction towards 153.65 is now expected. Once this corrective phase concludes, we anticipate the resumption of the broader upward trend, with the next primary target at 155.70. The Stochastic oscillator corroborates this view. Its signal line is below 50 and trending downwards towards 20, suggesting that short-term downward pressure (the expected correction) is building before the next potential upward wave.

Conclusion

USD/JPY continues its ascent, propelled by renewed risk appetite and domestic Japanese policy that implicitly favours a weaker yen. While minor corrective dips are anticipated in the short term, the overall technical and fundamental backdrop remains bullish. The path of least resistance points towards a test of 155.70, provided the pair maintains its footing above key support near 153.80.