Japanese Yen Price Action Setups: USD/JPY, AUD/JPY

The Japanese yen has been the short-seller’s preferred vehicle this week, as a stimulus-hungry candidate leads the race to become Japan’s next prime minister. Yen crosses have surged, with short-covering on the US dollar propelling USD/JPY to a 3.6% gain so far this week. The Canadian dollar is not far behind, with CAD/JPY up 3.5%, while AUD/JPY has climbed above 100 for the first time this year, rising 3.3% for the week.

 

 

Chart analysis by Matt Simpson - data source: TradingView
 

The yen’s weakness is closely tied to the campaign promises of incoming PM Sanae Takaichi. Yet it’s one thing to talk tough on the campaign trail and another to implement policy once in power. Former Bank of Japan executive Tomoyuki Shimoda has warned that even if Takaichi becomes prime minister, the BOJ may still choose to raise rates.

While it’s too early to call a top in yen crosses, fading volatility and overbought signals suggest that bullish momentum may be slowing ahead of the weekend. Whether this leads to consolidation or a deeper pullback depends largely on how markets interpret Takaichi’s stance on monetary policy.

 

 

 

Japanese Yen Crosses Surge as Traders Eye Policy Shifts in Tokyo

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

I’ve used the daily percentage indicator to highlight that while USD/JPY has rallied for a fifth consecutive day, its open-to-close volatility has declined over the past two sessions. This may not yet signal an imminent top, but it does suggest that bullish momentum is beginning to fade.

Wednesday’s candle also shows a small upper wick, though not large enough to form a classic reversal pattern such as a shooting star.

The next major swing high sits at 154.80 — around 230 pips, or 2.3%, above current prices. However, bulls should be cautious of resistance emerging around the 153 and 154 handles, as well as the monthly R1 pivot at 154.52.

Chart analysis by Matt Simpson - data source: TradingView USD/JPY

 

USD/JPY Technical Analysis: 1-Hour Chart

Until we see a fundamental shift in attitude towards the Japanese yen, small dips with conservative upside targets are preferred, given that daily volatility is declining during the current rally.

USD/JPY has paused just below the 153 handle following its recent surge, with price consolidating above a high-volume node (HVN) at 152.45. Short-term structure suggests potential for a minor pullback toward the 152.20–152.25 support area before another test of the 153.00 resistance zone. A break above 153 could extend gains toward 153.80–154.00, but a failure to hold above 152.20 would raise the risk of a deeper retracement toward 151.70 or the March high near 151.30.

Chart analysis by Matt Simpson - data source: TradingView USD/JPY

 

 

 

AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen

Price action is similar in many way on AUD/JPY, though in this case the Australian dollar gets a trendline against the Japanese yen on the one-hour chart. It is another market which could be vulnerable to over-extension heading into the weekend, but I suspect there is room for one more hurrah before the pullback unfolds.

The AUD/JPY rally has paused around the weekly R5 pivot and momentum is trying to turn lower, though bulls could seek dips towards the bullish trendline on the 1-hourb chart. A move to 100.80 ot the 101 handle could now be on the cards. If the trendline breaks, perhaps 100 could provide a more solid level of support.

Chart analysis by Matt Simpson - data source: TradingView AUD/JPY

 

Key Economic Events for Traders (AEDT / GMT+11)

10:50 JPY Foreign Bonds Buying, Foreign Investments in Japanese Stocks (USD/JPY, EUR/JPY, Nikkei 225)
11:00 AUD MI Inflation Expectations (Oct) (AUD/USD, AUD/JPY, ASX 200)
14:35 JPY 5-Year JGB Auction (USD/JPY, EUR/JPY, JGB futures)
17:00 EUR German Exports, Imports, Trade Balance (Aug) (EUR/USD, EUR/GBP, DAX)
17:00 JPY Machine Tool Orders (Sep) (USD/JPY, EUR/JPY, Nikkei 225)
18:00 EUR German Buba Balz Speaks (EUR/USD, EUR/GBP, DAX)
19:00 CNY FX Reserves (Sep) (USD/CNH, AUD/CNH, CN50 Index)
19:30 GBP BoE MPC Member Mann Speaks (GBP/USD, EUR/GBP, FTSE 100)
21:00 GBP Thomson Reuters IPSOS PCSI (Oct) (GBP/USD, EUR/GBP, FTSE 100)
21:00 EUR Germany Thomson Reuters IPSOS PCSI (Oct), Eurogroup Meetings (EUR/USD, EUR/GBP, DAX)
22:30 EUR ECB Publishes Account of Monetary Policy Meeting (EUR/USD, EUR/GBP, DAX)
23:00 CAD BoC Senior Deputy Governor Rogers Speaks (USD/CAD, EUR/CAD, CAD/JPY)
23:30 USD Initial Jobless Claims, Continuing Jobless Claims, Jobless Claims 4-Week Avg., Fed Chair Powell Speaks (S&P 500, Nasdaq 100, USD/JPY)
23:35 USD FOMC Member Bowman Speaks (S&P 500, Nasdaq 100, USD/JPY)
01:00 USD Wholesale Inventories, Wholesale Trade Sales (Aug) (S&P 500, Nasdaq 100, USD/JPY)
01:30 USD Natural Gas Storage (WTI Crude, Henry Hub Gas, USD/CAD)
02:00 EUR ECB’s Lane Speaks (EUR/USD, EUR/GBP, DAX)
02:30 USD 4-Week Bill Auction, 8-Week Bill Auction (UST yields, USD/JPY, Nasdaq 100)
03:00 USD WASDE Report (Corn, Soybeans, Wheat futures)
03:45 USD Fed Vice Chair for Supervision Barr Speaks (S&P 500, Nasdaq 100, USD/JPY)
04:00 USD 30-Year Bond Auction, Atlanta Fed GDPNow (Q3) (UST yields, S&P 500, USD/JPY)