FX.co ★ USD/JPY. Analysis and Forecast

Yuichiro Tamaki, leader of Japan's Democratic Party, voiced his opposition to further rate hikes by the Bank of Japan. Following his remarks, the Japanese yen began to lose its intraday gains. The yen faces additional pressure due to bullish stock sentiment and rising U.S. Treasury yields.

However, comments from Japan's Finance Minister Katsunobu Kato renewed concerns about potential government intervention, possibly lending support to the yen. Traders are also advised to await the Bank of Japan's decision, which, along with key U.S. macroeconomic releases this week, could set a new direction for the USD/JPY pair.

From a technical perspective, last week's breakout above the convergence of the 100- and 200-day simple moving averages (SMAs) and the 50% Fibonacci retracement level from the July-September decline served as a fresh bullish trigger. However, yesterday's failure to maintain momentum beyond the 61.8% Fibonacci level calls for caution. Additionally, the Relative Strength Index (RSI) on the daily chart is approaching overbought territory, so it may be advisable to wait for short-term consolidation or further pullback before opening new long positions.

Any subsequent decline in USD/JPY is likely to attract buying interest, with support around the overnight low of 152.66. Further selling could drive USD/JPY down to the 152.00 level, followed by support at 151.45 and another key level at 151.00. The downward trajectory could continue, challenging the convergence point of the 100- and 200-day SMAs and the 50% Fibonacci retracement level, now forming a key support base for spot prices.

On the other hand, resistance may first be encountered around 154.00, followed by the supply zone near 154.35-154.40. Should the pair break above this area, it could pave the way for a move toward the psychological level of 155.00, beyond which USD/JPY may be poised to retest the late-July high near 155.20.