The USD/JPY pair surged to a nine-month peak on Friday, nearing the significant 154.00 threshold. The yen wrapped up October with a decline of around 4%, indicating a notably poor performance for the month. The currency’s decline was intensified by changes in domestic politics, subsequent to the election of Sanae Takaichi as Prime Minister. Takaichi is recognized for her support of stimulative fiscal policy and the preservation of ultra-loose monetary conditions—a strategy that generally exerts downward pressure on a currency. The accommodating political environment was further supported by the Bank of Japan’s choice to maintain interest rates at their current level in October. Governor Kazuo Ueda expressed concerns that tighter global trade conditions might hinder economic growth and lead to a decline in corporate profits.
In a significant development, the new Finance Minister, Satsuki Katayama, stated that she no longer considers a yen exchange rate of 120-130 per dollar to be suitable. She highlighted that currency stability is currently her main priority, a statement that markets perceived as a retreat from direct intervention. The yen encountered challenges due to a generally strengthening US dollar. Market expectations for additional Federal Reserve rate cuts have diminished, as data revealing higher-than-anticipated inflation in Tokyo for October has complicated the domestic policy landscape.
USD/JPY has formed a bullish wave structure, achieving a level of 154.40. The pair is poised to undergo a phase of consolidation at these elevated levels. A clear downward breakout from this range would indicate the beginning of a correction, with a preliminary target set at 151.88. On the other hand, a breakout to the upside would pave the way for the subsequent phase of the rally targeting 155.70. The signal line continues to stay above zero and is trending decisively upwards, affirming the underlying bullish sentiment.
The yen experienced a significant drop in October, influenced by a combination of domestic political factors and a dovish monetary stance, alongside a strengthening US dollar. From a technical perspective, the bullish structure of USD/JPY is well-established. Although a short-term correction may occur, the prevailing trend appears to favor upward movement, with significant targets identified at 155.70 on the H4 chart. Market participants are closely monitoring the potential shift of Japanese authorities from verbal intervention to tangible measures should the yen’s depreciation continue.