USD/JPY Price Forecast - Dollar to Yen Pulls Back to 152.85 as 153K U.S. Job Cuts

USD/JPY (Dollar/Yen) Faces Heavy Volatility as BoJ Policy Doubts Collide with Fed Cut Bets

USD/JPY Pulls Back from 153.50 Resistance as U.S. Dollar Momentum Fades

USD/JPY slipped toward 152.85 in late Friday trading after being rejected near 153.50, marking a 0.6% weekly loss as investors turned defensive ahead of U.S. consumer sentiment data. The pair had earlier rallied when weak Japanese household spending data pushed the yen lower, but renewed dollar softness erased gains. Traders are now weighing Bank of Japan (BoJ) uncertainty, verbal intervention threats from Tokyo, and a deteriorating U.S. macro backdrop — each driving sharp intraday swings across the pair’s 150–154 range.

Japanese Spending Weakens, Cooling Inflation Pressure and Rate Hike Bets

Japan’s household spending rose just 1.8% year-on-year in September, missing forecasts for 2.5% and slipping from 2.3% in August. The soft reading hints that private consumption, which represents 55% of Japan’s GDP, remains fragile. Combined with moderating wage growth — nominal pay up 1.9% YoY while real wages fell 1.4% — the data suggests inflationary momentum is stalling. Japan’s core-core CPI eased from 3.3% to 3.0%, indicating slower consumer price growth. The result: markets sharply reduced bets on a December BoJ rate hike, reinforcing a more dovish policy outlook and lifting USD/JPY above 152.90 in early Asia trading. However, the weak consumption data also spurred concerns about Japan’s internal demand, curbing investor confidence in yen recovery despite intervention warnings.

Political Pressure Mounts as Tokyo Monitors Yen Weakness

Japanese Prime Minister Sanae Takaichi acknowledged that “price stability coupled with sustainable wage gains has yet to be achieved,” a comment interpreted as a green light for continued monetary accommodation. Finance Minister Katayama, however, issued a stark warning against “excessive currency volatility” as the yen trades near levels that triggered interventions in 2022 and 2024. The verbal pushback briefly supported the yen, but the move proved short-lived, highlighting the limited impact of rhetoric without direct market action. Analysts estimate that Tokyo could intervene if USD/JPY retests the 154.50–155.00 zone, a level closely monitored by the Bank of Japan and the Ministry of Finance.

U.S. Macro Weakness Adds Layer of Pressure to USD/JPY Bulls

Across the Pacific, the U.S. Dollar Index (DXY) lost traction as economic data softened. The University of Michigan Consumer Sentiment Index is expected to drop for a fourth straight month to 53.2, down from 53.6, reflecting growing pessimism about income and inflation. Meanwhile, the prolonged U.S. government shutdown, now on day 38, has delayed key labor data, amplifying volatility in currency and bond markets. Traders instead relied on private datasets like ADP and Challenger, which showed job cuts jumping from 54,064 in September to 153,074 in October — the highest level since early 2024. The spike in layoffs sharply increased the probability of a December Fed rate cut, with CME FedWatch Tool odds climbing to 70.6% from 62% the previous day.

Technical Landscape: Dollar-Yen Faces Key Support at 152.00

Technically, USD/JPY remains trapped in a narrowing wedge. The pair’s 4-hour chart shows immediate support between 152.00–152.50, followed by stronger demand at 151.50 (October 28 rebound zone). Below that, deeper supports emerge near 150.00 and 148.50, marking prior multi-month pivot ranges. On the upside, resistance sits at 153.40 (4H MA50), followed by 154.00–154.50, and a long-term ceiling near 155.00–156.00. Momentum indicators reveal early bearish divergence: the RSI has retreated from overbought territory, and the MACD histogram is flattening, signaling exhaustion after October’s 1,600-pip rally. Traders are watching for a daily close under 152.80, which could trigger a corrective slide toward 151.00 before the next bullish attempt.

BoJ-Fed Policy Divergence Keeps Long-Term Bias Tilted Upward

Despite short-term weakness, the fundamental yield differential continues to underpin USD/JPY. Japan’s 10-year government bond yield remains capped near 0.50%, while the U.S. 10-year Treasury hovers above 4.0%, maintaining a spread of roughly 350 basis points. This gap remains one of the strongest global carry trade incentives, sustaining dollar demand on every dip. The appointment of fiscal dove Sanae Takaichi as prime minister further reinforces market expectations that ultra-loose BoJ policies will persist well into 2026. As long as Tokyo refrains from direct intervention, foreign funds are expected to maintain long-dollar positions against the yen, especially given the global slowdown in risk sentiment and weak Japanese consumption trends.

Market Sentiment Split as Risk-Off Flows Lift the Yen Temporarily

Equity market volatility has injected new short-term demand for the yen. With S&P 500 and Nasdaq futures down over 0.7% this week, investors rotated into traditional safe havens. However, the yen’s safe-haven appeal remains partially muted due to Japan’s fragile domestic economy. USD/JPY volatility spiked to 9.3% annualized, its highest level since May, suggesting both long and short positions are being unwound rapidly. Hedge funds tracking Japanese intervention signals increased yen call option purchases, betting on at least one BoJ response before year-end, while macro funds maintained long-dollar exposure into December.

Key Scenarios for USD/JPY Moving Forward

A bearish scenario could unfold if the BoJ adopts a more hawkish tone or if verbal interventions evolve into actual yen purchases, potentially dragging USD/JPY back to 151.00 or lower. Weak U.S. data combined with dovish Fed comments would amplify that move. Conversely, a bullish breakout remains plausible if U.S. economic resilience persists, consumer sentiment stabilizes above 55, and BoJ signals patience on normalization. In that case, the pair could retest 154.50, the November 4 high, and potentially target 156.00 if Treasury yields rebound.

Verdict: HOLD — Short-Term Correction Likely, Long-Term Bias Still Bullish

The balance of forces leaves USD/JPY (Dollar/Yen) in a consolidation phase between 151.50 and 154.50. The fading dollar momentum, weaker U.S. jobs outlook, and softer Japanese spending data all argue for near-term volatility, but the long-term uptrend remains intact as yield spreads favor the U.S. The risk of verbal or actual intervention near 155.00 remains a constraint, yet sustained Fed-BoJ divergence keeps structural support under the dollar.
Recommendation: HOLD — with a bullish bias above 151.50, targeting 154.50–156.00 on renewed U.S. yield strength.

That's TradingNEWS