The Japanese Yen remains under pressure and trades at a low level. Can USD/JPY successfully break through the 155 level?

USD/JPY Technical Analysis: 155.00 Becomes a Key Resistance

From a technical perspective, the USD/JPY currency pair shows a positive trend on the 4-hour chart. On Friday, it rebounded from the support level at 153.60 (corresponding to the 100-period simple moving average) and successfully stabilized above the resistance zone at 154.45-154.50, providing some technical confirmation for the bulls. The daily oscillators remain in the positive zone and are far from overbought, indicating room for further upside.

If USD/JPY can break and hold above the psychological level of 155.00, it will strengthen the bullish outlook and push the price toward the intermediate resistance at 155.60-155.65, ultimately targeting the 156.00 round figure. Conversely, if it falls below the immediate support at 154.00, buying interest may emerge around 153.60-153.50. A breakdown of this zone would test the 153.00 round figure. If 153.00 is broken, the short-term bias will turn bearish, and the price could further decline to the 152.15-152.10 area.

Economic Data and Policy Uncertainty: Yen Faces a Dilemma

Japan’s economy performed poorly in the third quarter, becoming a core factor suppressing the yen. Data from the Cabinet Office shows Japan’s GDP contracted by 0.4% quarter-on-quarter from July to September, marking the first negative growth in six quarters; year-on-year, it declined sharply by 1.8%, contrasting with the 2.3% growth in the previous quarter. Although the data was not as bleak as the most pessimistic market expectations, it still reflects a slowdown in Japan’s economic momentum.

This economic softening has dampened market expectations for a rate hike by the Bank of Japan. Coupled with Prime Minister Sanae Sato’s government preparing a new round of fiscal stimulus aimed at alleviating the impact of rising living costs on households, market bets on further tightening by the BOJ have been reduced. The political tilt towards ultra-loose monetary policy further reinforces this shift in expectations, putting downward pressure on the yen.

Meanwhile, Japanese Finance Minister Satsuki Katayama has indicated close attention to currency market movements, and Economy Minister Minoru Kihara warned that excessive yen depreciation could push up import costs and inflation. Although these verbal interventions have not reversed the yen’s downward trend, they have indeed constrained yen bears to some extent.

Factors Supporting a Stronger Dollar and the Fed’s Policy Shift

The dollar has recently performed relatively steadily, mainly benefiting from a subtle shift in the Fed’s policy stance. Increasingly, Fed officials have issued cautious signals amid limited economic data, significantly reducing market expectations for a rate cut in December. The diminished rate cut bets have provided tangible support to the dollar, helping USD/JPY stay above 154.00.

However, the dollar’s rally also faces a ceiling. Concerns that the longest US government shutdown in history could negatively impact economic momentum make it difficult for the dollar to attract meaningful new buying. Market participants will need to wait for the US non-farm payroll report due Thursday, as well as the FOMC minutes and Fed speeches, for more clues on the future policy path.

Market Sentiment and Risk Factors: Seeking Opportunities Amid Caution

At the start of the new week, the Asian trading session saw the yen continue to weaken, trading near a nine-month low. However, cautious sentiment among investors should not be overlooked: expectations of intervention by Japanese authorities to stabilize the yen, along with the generally weak tone of global stock markets, have limited the yen’s further decline. Additionally, heightened geopolitical risks due to Japan and China issuing stern warnings over Taiwan have created a safe-haven environment.

In this context, the bullish momentum for USD/JPY requires an effective breakout above 155.00 to confirm the continuation of the upward trend. Conversely, any failed downward break could trigger profit-taking and shift focus toward defending the medium-term support levels.