Ella 
During Thursday’s Asian session, USD/JPY retreated slightly to around 152.60, with the yen showing resilience, yet the market continues to exhibit clear divergence between bulls and bears. Japan’s Finance Minister, Shunichi Kato, this week warned that recent yen fluctuations have been excessive, emphasizing that the currency should reflect economic fundamentals. This statement provided short-term support to the yen, though further gains remain constrained by several factors.
Expectations of potential rate hikes in Japan have provided some underpinning for the yen. Inflation has remained above the Bank of Japan’s 2% target for consecutive quarters, and the economy has grown for five straight quarters, maintaining market hopes for additional tightening this year.
However, political and fiscal uncertainties weigh on the yen. Japan’s new Prime Minister, Sanae Takaichi, is expected to promote expansionary fiscal policies and oppose further monetary tightening by the central bank. This scenario limits confidence among yen bulls and increases uncertainty over policy direction.
Additionally, easing geopolitical risks have reduced safe-haven demand. The recent first-phase peace agreement between Israel and Hamas has eased global tensions, curbing the yen’s upside as a defensive currency.
On the dollar side, the September FOMC minutes revealed that most Fed officials favor rate cuts to address labor market risks, though there is disagreement over the timing and magnitude of easing. According to the CME FedWatch Tool, markets still assign a high probability to 25-basis-point cuts in both October and December, providing some support to the USD and keeping USD/JPY at relatively elevated levels.
The USD/JPY daily Relative Strength Index (RSI) is approaching overbought territory, limiting new bullish entries in the short term. On a potential pullback, support levels at the 152.00 round number and the prior night’s low near 151.70 may attract buyers, with a stronger floor at 151.00.
Resistance levels are seen at the 153.00 round number and Wednesday’s multi-month high. A sustained break above these points could push prices further toward 153.70–153.75, with a potential ultimate target at 154.00 — the first test of this level since February 12, 2025.
Overall, USD/JPY remains in a short-term tug-of-war between bulls and bears. Pullbacks present low-risk buying opportunities, while a breakout of key resistance would confirm the continuation of the bullish trend. Traders should monitor policy developments from the Japanese Prime Minister and the Bank of Japan, as well as upcoming Fed signals, to capture short- to medium-term trading opportunities.
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