|

USD/JPY Price Forecast: Bulls turn cautious as intervention talks counter fiscal concerns

  • USD/JPY retreats sharply from a two-week high as Japanese officials stepped up intervention warnings.
  • Dovish Fed expectations and concerns about the Fed’s independence exert some pressure on the USD.
  • Japan’s snap election results add to fiscal concerns and cap the JPY amid bets for a delayed BoJ rate hike.

The USD/JPY pair witnessed an intraday turnaround on Monday and retreated nearly 150 pips from the 157.65 region, or over a two-week high, touched in the aftermath of Japanese Prime Minister Sanae Takaichi's landslide victory. In fact, Takaichi's Liberal Democratic Party (LDP) sailed past the 233 seats needed for a majority in the lower house, paving the way for promised tax cuts and a stronger defence system. This, in turn, shifted focus squarely to Japan's already strained public finances and undermined the Japanese Yen (JPY).

Adding to this, the labour ministry reported that Japan’s nominal wages rose 2.4% YoY in December 2025, up from a revised 1.7% gain in the previous month. The reading, however, fell short of market expectations, while inflation-adjusted real wages fell 0.1% in December from a year ago, marking the 12th straight month of contraction. The data temper bets for an immediate rate hike by the Bank of Japan (BoJ). This, along with a positive risk tone, further dented the JPY's safe-haven status and provided a modest lift to the USD/JPY pair.

The market reaction, however, faded as Japanese officials stepped up JPY intervention warnings. Japan's Finance Minister Satsuki Katayama said that she will communicate with markets on Monday if needed to stabilize the JPY and stressed that Japan retains the right to intervene against moves that deviate from fundamentals. Moreover, Japan's Chief Cabinet Secretary Minoru Kihara said that he is concerned about one-sided FX moves, while currently, diplomat Atsushi Mimura stated that he was closely watching moves with a high sense of urgency.

This, in turn, prompts some intraday short-covering around the JPY, which, along with some follow-through US Dollar (USD) selling, contributes to the USD/JPY pair's downfall. The USD Index, which tracks the Greenback against a basket of currencies, extends its retracement slide from a two-week high, touched last Thursday, amid bets that the US Federal Reserve (Fed) will lower borrowing costs at least two more times this year. Furthermore, concerns about the US central bank's independence exert additional downward pressure on the buck.

US Treasury Secretary Scott Bessent on Thursday refused to rule out the possibility of a criminal investigation of Kevin Warsh if he ends up refusing to cut interest rates. Moreover, US President Donald Trump said on Saturday that he might sue his newly selected Fed chair nominee if he didn’t lower rates. This, in turn, favors the USD bears and backs the case for further USD/JPY losses. Traders, however, might refrain from placing aggressive bets and opt to wait for this week's release of the US Nonfarm Payrolls (NFP) report and the US consumer inflation figures.

USD/JPY 1-hour chart

Chart Analysis USD/JPY

Technical Analysis:

The USD/JPY pair has been showing some resilience below the 100-hour Simple Moving Average (SMA) and finding some support near the 156.25-156.20 region. The latter should act as a key pivotal point, which, if broken decisively, should pave the way for a further depreciating move. The Moving Average Convergence Divergence (MACD) histogram remains sub-zero and has begun to contract, indicating the MACD line sits below the Signal line while momentum lingers near the zero mark. The Relative Strength Index (RSI) stands at 44 (neutral), reflecting subdued demand after a pullback from earlier overbought readings.

Meanwhile, spot prices hold above the 100-hour SMA, which continues to slope higher and offers initial dynamic support, underscoring a short-term bullish bias. However, a close back beneath the average would risk a deeper consolidation. A shift of the MACD histogram back above zero would strengthen upside momentum. An RSI recovery through 50 would endorse renewed buying pressure, whereas failure to clear that threshold would keep ranges in play.

(The technical analysis of this story was written with the help of an AI tool.)

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.


Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations
Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.
BoJ recap: A pause for now... but Japan has entered a new inflation phase
The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.
The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.