Japanese Yen Forecast: USD/JPY Renews Rally – 158.00 Next?

USD/JPY Key Points

• USD/JPY has renewed its rally after the dip late last week.
• Japan’s combination of large (and growing) sovereign debt loads and easy monetary policy is sparking long-term fiscal concerns.
• Unless and until the near-term bullish trend line breaks, traders are likely to continue buying near-term dips in USD/JPY for a potential rally to the upper-158.00 zone next.

Japanese markets were closed today for the Labor Thanksgiving Day holiday, but that’s done little to deter yen sellers. Year to date, the Japanese yen is almost exactly flat against the US dollar…which doesn’t necessarily sound terrible until you realize that those are the two worst performing major currencies in 2025 and they’ve fallen by more than 11% against the euro and Swiss franc:

Source: FinViz

From a fundamental perspective, the combination of ongoing easy monetary policy (read low interest rates) and a massive fiscal stimulus (new PM Takaichi’s USD $135B spending package) are raising fears about the country’s massive sovereign debt load, a decades-long problem that is, if anything, getting worse by the day. Even Friday’s falling US yields and renewed speculation of a Fed rate cut in December offered only a 1-day respite for the continuous rise in USD/JPY.

With the US on holiday the latter half of the week, the focus will shift across the Pacific to Japanese data, when traders will see the latest Tokyo CPI, employment, industrial production and retail sales figures. Based on the market’s long-term fiscal concerns, even solid Japanese data may not be enough to put a durable floor under the yen.

Japanese Yen Technical Analysis: USD/JPY Daily Chart

 

Source: StoneX, TradingView

From a technical perspective, USD/JPY remains above its 8-week accelerated bullish trend line. As long as that remains the case, the path of least resistance will remain to the topside. Friday’s dip alleviated the near-term overbought signal from the 14-day RSI, setting the stage for another leg higher from here. Looking at the chart, the next logical resistance level for bulls will be the 16-month high in the upper-158.00s; this is also where the risk of direct intervention by the Ministry of Finance will surge.

Unless and until the near-term bullish trend line breaks, traders are likely to continue buying near-term dips in USD/JPY as the path forward for Japanese policymakers continues to narrow.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX