USD/JPY is trading higher on Thursday, at around 157.20 at the time of writing, up 0.20% on the day. The pair continued its upward momentum throughout the week, supported by the macroeconomic backdrop that continues to favor the US Dollar (USD) over the Japanese Yen (JPY).
The Japanese yen remains under pressure amid growing concerns about Japan’s fiscal path. The government recently proposed an additional budget of 25 trillion yen to fund Prime Minister Sanae Takaishi’s stimulus plan, a figure much higher than last year’s additional budget.
This potential for increased debt issuance has pushed borrowing costs to their highest levels in several decades and continues to undermine the Japanese yen. Meanwhile, recent data showed that the Japanese economy contracted in the third quarter for the first time in six quarters, a development that could delay any interest rate hike by the Bank of Japan.
Investors are also watching repeated warnings from Japanese authorities, who describe recent currency market movements as “too fast and one-sided.” Chief Cabinet Secretary Minoru Kihara said Thursday that he is watching the markets with a “great sense of urgency.” However, as ING analysts noted, Japanese officials typically prefer to intervene after a negative US dollar catalyst, limiting the immediate impact of these verbal warnings.
On the other side of the pair, the US dollar remains supported by a less pessimistic outlook towards the Federal Reserve. Minutes from the October Federal Open Market Committee meeting on Wednesday revealed a clear division among policymakers, with many members opposing another interest rate cut and warning that easing too quickly could risk persistent inflation.
This position strengthens the US dollar ahead of the September non-farm payrolls report scheduled for later today, a release that markets consider extremely important. According to ING, the US dollar has “gone too far,” although only a noticeably weak non-farm payrolls reading could meaningfully reverse the recent gains, especially since the Fed will not have access to October and November data before its December meeting.
USD/JPY Technical Analysis: Bull market rally is losing momentum
4-hour chart of USD/JPY. Source: FXStreet
On the 4-hour chart, the USD/JPY is trading at 157.20. It is trading below the opening price today, down 22 points. The 100-day simple moving average rises and remains well below the price at 154.33, reinforcing the bullish backdrop. Staying above this dynamic support keeps buyers in control. The 14-period RSI is recording 74.73, in overbought territory and retreating from recent highs. The rising trend line from 146.63 supports the advance, offering support near 155.18.
With the 100 period simple moving average continuing to slope upward and the price holding above it, the setup favors an uptrend. A Relative Strength Index (RSI) above 70 indicates extended conditions that could ease the follow-through before the next stage. Immediate resistance is at 157.78, and a break higher would extend the rally, while failure to clear this barrier could trigger a corrective pullback.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
