USD/JPY hits nine-month high as Yen endures tough October

The USD/JPY pair climbed to a nine-month high on Friday, approaching the key 154.00 level. The yen concluded October with losses of approximately 4%, marking a highly unsuccessful month. The currency's decline was exacerbated by domestic political shifts, following the election of Sanae Takaichi as Prime Minister. Takaichi is a known advocate for stimulative fiscal policy and the maintenance of ultra-loose monetary conditions—a combination that typically weighs on a currency.

This dovish political backdrop was complemented by the Bank of Japan's decision to hold interest rates steady in October. Governor Kazuo Ueda further dampened sentiment by warning that tighter global trade conditions could stifle economic growth and reduce corporate profits.

In a notable shift, the new Finance Minister, Satsuki Katayama, clarified that she no longer views a yen exchange rate of 120-130 per dollar as appropriate. She emphasised that currency stability is now her primary focus, a comment markets interpreted as a step back from direct intervention.

The yen also faced pressure from a broadly strengthening US dollar. Market expectations for further Federal Reserve rate cuts have receded, while data showing higher-than-expected inflation in Tokyo for October complicated the domestic policy outlook.

Technical analysis: USD/JPY

Four-hour chart

On the H4 chart, USD/JPY has completed a bullish wave structure, reaching 154.40. The pair is now likely to enter a period of consolidation at these highs. A decisive downward breakout from this range would signal the start of a correction, with an initial target at 151.88. Conversely, an upward breakout would open the path for the next leg of the rally towards 155.70.

This technical outlook is supported by the MACD indicator. Its signal line remains above zero and is pointing firmly upwards, confirming the underlying bullish momentum.

One-hour chart

On the H1 chart, the market completed an initial growth wave to 153.33, formed a tight consolidation range, and then broke upwards to achieve its local target of 154.40. Following this peak, a pullback towards at least 153.33 is anticipated. Upon finding support, the next upward wave is expected to target 154.83, with the potential to extend the broader bullish trend towards 155.15.

The Stochastic oscillator aligns with this view. Its signal line is above 50 and rising sharply towards 80, indicating that short-term bullish momentum remains intact.

Conclusion

The yen's sharp decline in October was driven by a perfect storm of domestic political and monetary dovishness, coupled with a resurgent US dollar. Technically, USD/JPY's bullish structure is firmly established. While a short-term correction is possible, the path of least resistance remains skewed to the upside, with key targets at 155.70 on the H4 chart. All eyes will be on whether Japanese authorities will transition from verbal intervention to concrete action if the yen's weakness persists.