USD/JPY on Hold, But Yen Rally Could Resume at Any Moment
The political impasse in Washington, which could last for at least several days, has delayed the release of critical macroeconomic data, including the key September non-farm payrolls (NFP) report.
Domestically, the yen is gaining momentum from growing market expectations that the Bank of Japan (BoJ) could resume policy normalisation this year. Markets are currently pricing in a 40% probability of a 0.25 percentage point rate hike as early as the October meeting.
Supporting this hawkish tilt, the latest Tankan survey showed large manufacturers' sentiment improved in the third quarter, reaching its highest level since late 2022. However, the economic outlook remains clouded by persistent pressure from US tariff measures.
Market participants are now turning their attention to the upcoming consumer confidence index, which may offer fresh clues on the economy's trajectory.
Technical Analysis: USD/JPY
H4 Chart:
On the H4 chart, USD/JPY completed a correction to 146.62 and is now forming a narrow consolidation range above this level. A downside breakout would likely lead to an extension of the decline towards 146.50. Conversely, an upside breakout would open the potential for a growth wave towards 148.22, to be followed by a decline back to 146.50. Once this corrective phase is complete, the stage would be set for a new upward wave targeting 151.15. This scenario is technically supported by the MACD indicator, whose signal line is at lows below zero but appears poised to reverse upwards.
H1 Chart:
The H1 chart shows the pair achieving its local downside target at 146.60 and forming a consolidation range above it. An upward breakout from this range would initiate a growth wave towards 148.22, after which a corrective decline to 146.50 is expected. The Stochastic oscillator confirms this outlook, with its signal line above 50 and rising sharply towards 80.
Conclusion
While USD/JPY has entered a period of consolidation, the yen's underlying drivers—safe-haven demand and BoJ policy speculation—remain potent. The technical structure suggests a near-term bounce is possible, but the potential for a resumption of the yen's rally remains high, making the current pause a potentially temporary one.
Disclaimer:
Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.