USD/JPY rally pauses as Yen seeks footing

The USD/JPY pair slowed its ascent on Friday, stabilising near 149.69 – close to its lowest level in nearly two months. The yen remained under pressure from broad US dollar strength, fuelled by robust economic data that tempered expectations for aggressive Federal Reserve easing.

Recent figures reinforced the resilience of the US economy: weekly jobless claims fell to 218,000, while second-quarter GDP growth was revised up to 3.8% year-on-year, marking the fastest pace in nearly two years.

In Japan, data provided mixed signals. Core inflation in Tokyo held steady at 2.5% in September, matching the August reading but falling short of the 2.8% forecast. The minutes from the Bank of Japan's July policy meeting revealed that some members are inclined toward further rate hikes, contingent on aligned economic and inflation trends. While rates were held unchanged in September, two dissenting votes suggest that monetary tightening may be approaching sooner than anticipated.

Technical analysis: USD/JPY

Four-hour chart

On the H4 chart, USD/JPY completed an initial advance to 149.90. The pair is now forming a consolidation range below this level. A downward breakout would likely initiate a correction towards 148.78, with a potential extension to 147.77 (testing the level from above). Once this correction concludes, a new upward move targeting 151.05 is expected to develop. This outlook is supported by the MACD indicator: its signal line remains well above zero, although a pullback towards the zero line is anticipated.

One-hour chart

The H1 chart shows the pair forming a consolidation range around 148.78 before breaking upward and achieving its first target at 149.90. A new range is now forming below this peak. An expected downside breakout should trigger a correction towards 148.78. The Stochastic oscillator aligns with this view, as its signal line is below 50 and falling sharply towards 20.

Conclusion

USD/JPY is taking a breather after its recent rally, caught between a strong US dollar and growing speculation around a more hawkish BoJ. The near-term technical bias suggests a corrective pullback is likely, which could offer a more solid foundation for the next leg upward. Traders will be watching for clearer signals from both central banks to determine the pair's next sustained move.