USD/JPY Fresh Four-Month Lows on USD Weakness
USD/JPY has just tested the 23.6% retracement of the long-term trend driven by the carry trade, but bears are again showing caution while at fresh lows.
Share this:
USD/JPY Talking Points:
- USD/JPY continued to slide earlier this morning, setting a fresh four-month low. While the 150 break two weeks ago was driven by the JPY side after a stronger CPI print, the more recent break was driven by USD-weakness on the back of recession fears in the United States.
- There remains potential for larger carry unwind scenarios, and that’s something that could have a detrimental effect on U.S. equities.
- Beware the bear trap: USD/JPY has set multiple fresh lows over the past month but outside of the CPI-fueled breakdown on the 20th, there’s been a penchant for bear traps along the way.
USD/JPY remains well-elevated on a long-term basis, as the pair has just crossed the 23.6% retracement of the 2021-2024 major move. While the pair was catapulted higher via the carry trade, with higher U.S. inflation starting the move in 2021 and FOMC rate hikes driving it into another gear in 2022, bulls have continued to hold on even as the Fed has cut rates multiple times and the Bank of Japan has hiked rates twice. That’s compressed the rate divergence between the two economies but we haven’t yet seen recurrence of the carry unwind scenario that swept global markets by storm last summer, when a swell of Yen-strength drove a global de-leveraging event across several different markets.
USD/JPY Weekly Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY Shorter-Term
While it’s been a steady stream of lower-lows and highs from the weekly chart above, shorter-term has been a more challenging backdrop in the pair as sellers haven’t been able to show much for extension when given the opportunity at prints of fresh lows. There was the CPI-fueled breakdown on the 20th of February, and that’s what initially pushed the pair back below the 150.00 handle; but selling pressure slowing below the big figure and that’s led to a grinding backdrop over the past couple of weeks.
This highlights the fact that pullbacks to lower-high resistance could be considered for bearish trend continuation, while chasing breakdowns may be seen as a less attractive strategy given the pair’s recent penchant for showing bear traps.
So far this week, there’s already been three clean tests of resistance at prior supports, with Monday’s test of 150.77, yesterday’s test of 150.00 or this morning test of 149.23, which finally pushed the pair below the 23.6% retracement of the longer-term move looked at above which plots at 147.94.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY Shorter-Term Levels
The four-hour chart shows recent gyrations clearly, with the longer-term Fibonacci level at 147.94 coming into hold the highs for the two most recently completed four-hour bars. But, the past four-hour candle closed in positive territory while also setting a higher-high above the previous, with resistance showing at prior support of 148.40. This keeps the door open for a larger pullback, and above that, 149.23 is in-play and then 150.00 is above that.
For next support, the 61.8% retracement of the same Fibonacci setup that showed 149.23 as the 50% marker plots just a little lower, at 146.95.
USD/JPY Four-Hour Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
USD/JPY Talking Points:
- USD/JPY continued to slide earlier this morning, setting a fresh four-month low. While the 150 break two weeks ago was driven by the JPY side after a stronger CPI print, the more recent break was driven by USD-weakness on the back of recession fears in the United States.
- There remains potential for larger carry unwind scenarios, and that’s something that could have a detrimental effect on U.S. equities.
- Beware the bear trap: USD/JPY has set multiple fresh lows over the past month but outside of the CPI-fueled breakdown on the 20th, there’s been a penchant for bear traps along the way.
USD/JPY remains well-elevated on a long-term basis, as the pair has just crossed the 23.6% retracement of the 2021-2024 major move. While the pair was catapulted higher via the carry trade, with higher U.S. inflation starting the move in 2021 and FOMC rate hikes driving it into another gear in 2022, bulls have continued to hold on even as the Fed has cut rates multiple times and the Bank of Japan has hiked rates twice. That’s compressed the rate divergence between the two economies but we haven’t yet seen recurrence of the carry unwind scenario that swept global markets by storm last summer, when a swell of Yen-strength drove a global de-leveraging event across several different markets.
USD/JPY Weekly Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY Shorter-Term
While it’s been a steady stream of lower-lows and highs from the weekly chart above, shorter-term has been a more challenging backdrop in the pair as sellers haven’t been able to show much for extension when given the opportunity at prints of fresh lows. There was the CPI-fueled breakdown on the 20th of February, and that’s what initially pushed the pair back below the 150.00 handle; but selling pressure slowing below the big figure and that’s led to a grinding backdrop over the past couple of weeks.
This highlights the fact that pullbacks to lower-high resistance could be considered for bearish trend continuation, while chasing breakdowns may be seen as a less attractive strategy given the pair’s recent penchant for showing bear traps.
So far this week, there’s already been three clean tests of resistance at prior supports, with Monday’s test of 150.77, yesterday’s test of 150.00 or this morning test of 149.23, which finally pushed the pair below the 23.6% retracement of the longer-term move looked at above which plots at 147.94.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY Shorter-Term Levels
The four-hour chart shows recent gyrations clearly, with the longer-term Fibonacci level at 147.94 coming into hold the highs for the two most recently completed four-hour bars. But, the past four-hour candle closed in positive territory while also setting a higher-high above the previous, with resistance showing at prior support of 148.40. This keeps the door open for a larger pullback, and above that, 149.23 is in-play and then 150.00 is above that.
For next support, the 61.8% retracement of the same Fibonacci setup that showed 149.23 as the 50% marker plots just a little lower, at 146.95.
USD/JPY Four-Hour Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Gold Q4 2026 outlook: Resilience in the face of rallying dollar and yields
As we headed towards the latter stages of Q3 and into Q4, the Fed had just hiked rates in a hawkish FOMC meeting, while the likes of the ECB and BoJ had also tightened their respective policies. Oil prices remained elevated amid the prolonged US-Iran conflict. Meanwhile, bond yields were breaking out, and the dollar was higher across the board. Yet, remarkably, gold was still holding in the positive territory for the third quarter, even if it had weakened somewhat in September.
Equity Indices Q4, 2026 Outlook: Cracks Begin to Show
There's still an open door for a melt-up in the S&P 500 and Nasdaq but the Dow and Russell 2000 are looking more vulnerable, and until calm hits the Treasuries market there's a higher probability for volatility. The big question is whether that's a next quarter theme or not.
USD/JPY Q4 2026 Outlook: Hawkish Fed Pricing Clashes With Intervention Risk
The year-end tug-of-war is clear: hawkish Fed pricing supports USD/JPY, while intervention risk limits the upside.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.