Japanese Yen Short-term Outlook: USD/JPY Breakdown Faces Major Test Ahead of Fed, BoJ

Japanese Yen Technical Forecast: USD/JPY Short-term Trade Levels

• USD/JPY has plunged more than 6.7% from the pre-intervention highs following last week’s confirmed break of the 2025 trend structure.
• Although the broader technical outlook remains lower, the selloff is approaching a major support cluster near the yearly lows – risk for inflection ahead.
• A sustained break lower would expose another major leg of the decline, while a larger recovery could reset positioning for the bears.
• U.S. CPI sets the stage for next week’s Fed and BoJ decisions, while the threat of renewed intervention remains an important source of volatility.
• Resistance 162.57, 162.84 (key), 163.33 - Support 161.69/95 (key), 161.33, 160.37/74

USD/JPY remains under heavy pressure after last week’s decline confirmed a major technical break and extended the reversal from the yearly highs. Momentum has become increasingly stretched as the pair approaches an important support region, raising the stakes for the next reaction. With U.S. CPI on tap Friday and both the Fed and BoJ set to decide policy next week, the coming sessions could prove critical in determining whether the selloff has further to run or begins to stabilize. Battle lines drawn on the USD/JPY short-term technical charts.

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Japanese Yen Price Chart – USD/JPY Daily

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

Technical Outlook: USD/JPY has plunged more than 6.7% from the pre-intervention highs, with last week’s decline confirming a break of the 2025 uptrend. Bearish momentum has continued to accelerate, with daily RSI slipping into oversold territory while weekly RSI falls to its lowest reading since May 2025. While the broader technical outlook remains weighted to the downside, the selloff is now approaching key support objectives near the yearly lows. The focus is on a possible price inflection into this region IF reached, with the reaction there likely to offer guidance on the next major directional move.

Japanese Yen Price Chart – USD/JPY 240min

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

Notes: A closer look at Japanese Yen price action shows USD/JPY trading within the confines of a proposed descending pitchfork extending off the yearly high. Initial support rests at the 153-handle and is backed closely by the 2022/2023 highs and the January swing low at 151.94-152.10, and the 100% extension of the July decline at 151.63. Note that the lower parallel converges on these levels over the next few weeks and losses below this slope would threaten another major leg lower in price. Subsequent support objectives rest with the 2025 July high close at 150.74 and the September high close at 149.81.

Initial resistance is eyed at the 38.2% retracement of the 2025 advance and the May low at 154.78-155.03. The bears remain in control while below the 61.8% retracement of the 2026 range and yearly open at 156.64/67 with key resistance back at 157.70/90- a region defined by the 2025 high-day close (HDC) and the November swing high. Gains beyond this threshold would suggest a more significant low is in place, and a larger trend reversal is underway.

           

Bottom line: USD/JPY is approaching a major technical hurdle near the yearly lows. While the  outlook remains tilted to the downside, the bears may be vulnerable near-term heading into the lower bounds of the proposed downtrend. From a trading standpoint, rallies should be limited to 156.67 IF price is heading lower on this stretch with a close below 151.63 needed to fuel the next major leg of the decline.

Attention into the close of the week turns to Friday’s U.S. CPI report, the final major inflation reading ahead of next week’s highly anticipated Fed and Bank of Japan rate decisions. With markets currently pricing roughly a 62% probability of a Fed rate hike next week, the inflation data could prove critical in shaping U.S. rate expectations and Treasury yields. A hotter-than-expected print would likely reinforce the case for tightening, while softer inflation could challenge those expectations and add further pressure to USD/JPY.

Meanwhile, intervention risk remains a key consideration following Treasury Secretary Scott Bessent’s latest warning to currency traders. Bessent effectively challenged markets to bet against the recent yen-support effort, underscoring Washington’s commitment to a stronger Japanese currency and adding another layer of downside risk for USD/JPY. With both the Fed and BoJ decisions on tap next week, the evolving policy differential—and the threat of renewed official intervention—could keep volatility elevated. Stay nimble into the releases and watch the weekly close for guidance. Review my latest Japanese Yen Weekly Forecast for a closer look at the longer-term USD/JPY technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex