Japanese Yen Forecast: USD/JPY 4% Rally Challenges Post-Intervention Downtrend

Japanese Yen Technical Forecast: USD/JPY Weekly Trade Levels

• USD/JPY has rebounded nearly 4% from the September low following the sharp reversal from the yearly highs.
• Momentum has shifted firmly in favor of the bulls, with weekly RSI attempting to reclaim neutral territory for the first time since early August.
• The recovery is approaching a major technical confluence that could determine whether the post-intervention decline remains intact.
• Core PCE, Japanese CPI and Non-Farm Payrolls headline next week’s event risk as traders reassess the Fed-BoJ policy outlook.
• Resistance 160.64/74 (key), 161.95, 164- Support 157.70-158.08, 156.67/73 (key), 154.79

USD/JPY has staged an impressive recovery after the September selloff found support near the lower bounds of the developing downtrend. The shift in momentum has materially improved the near-term technical backdrop, but the rally is now approaching an important inflection zone where buyers will need to prove they can sustain the advance. With U.S. and Japanese inflation data followed by Non-Farm Payrolls next week, the coming stretch could prove critical for the broader directional outlook. Battle lines are drawn on the USD/JPY weekly technical chart.

Japanese Yen Price Chart – USD/JPY Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In last month’s Japanese Yen Technical Forecast we noted that USD/JPY was trading just above uptrend support and that, “From a trading standpoint, rallies should be limited to 160.74 IF price is heading lower on this stretch with a close below 156.67 needed to validate a break of the 2025 uptrend.” USD/JPY registered an intraday high at 160.39 the following week before mounting an outside-week reversal that extended more than 4.6% off the September high (4.7% off the yearly high). The decline was halted at the 25% parallel of a descending pitchfork extending off the yearly high with the recovery now extending nearly 4% off the monthly low.

Weekly RSI (14)

Weekly momentum is now attempting to mark a close above the 50 for the first time since early August with daily & 4-hour RSI turning aggressively in favor of the bulls this week. The rally is now approaching the first major technical consideration at the 61.8% retracement of the decline off the yearly high at 159.75. Note that the 2025 channel line and the 75% parallel of the downslope converges on this level over the next few weeks and further highlights the significance of this key pivot zone. A breach / weekly close above this threshold would be needed to fuel the next leg of the rally with subsequent resistance objectives eyed at the 2024 high-week close and the April high at 160.74, and the 2024 swing high at 161.95.

Look for initial support back at the 2025 / January high week closes (HWC) at 157.70-158.08 backed by the objective 2026 yearly open at 156.67. Once again, a break / weekly close below this threshold would be needed to mark resumption of the July downtrend with key support unchanged at 151.95-152.69. This region is defined by the 2026 low close and the 2022 & 2023 swing highs. Note that the 25% parallel converges on this zone into the start of October and losses below this slope would threaten another bout of accelerated losses for the Dollar.

Bottom line: A two-week rally is now approaching a major technical confluence with the shift in momentum keeping the focus on a possible test of the July downtrend. From a trading standpoint, rallies would need to be limited to 159.75 for the trend to remain intact with a close below 156.67 once again needed to put the bears in control.

USD/JPY enters next week with the focus firmly on the evolving U.S.–Japan policy differential. Core PCE on Wednesday will help shape expectations for the Fed’s reaction function, while Japanese CPI on Thursday will provide an important test of the Bank of Japan’s tightening bias before attention turns to Non-Farm Payrolls on Friday.

The U.S. Treasury backdrop remains defined by exceptionally elevated yields, with the 10-year recently reaching the highest levels in nearly 19-years. That keeps the dollar’s yield advantage intact and remains a supportive fundamental force for USD/JPY, while also making the pair vulnerable to sharp reversals if the data meaningfully alters the U.S. rate outlook. Japanese CPI will be important in assessing whether domestic inflation can reinforce the BOJ’s tightening bias, adding another layer of risk for yen bears as the market weighs elevated U.S. yields against the prospect of further Japanese policy tightening. Underlying these risks is the growing threat of renewed coordinated intervention, with traders alert to any official commentary suggesting authorities may be prepared to step in again. Stay nimble into the monthly cross and watch the weekly closes for guidance. Review my latest Japanese Yen Short-term Outlook for a closer look at the near-term USD/JPY technical trade levels.

USD/JPY Key Economic Data Releases

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex