USD/JPY Forecast: Can the yen maintain its strength?

The week begins with USD/JPY posting a gain of just over 0.5%. However, this mild recovery comes after the pair recorded a decline of nearly 3.00% over the previous five sessions.

The recent bearish bias in favor of the yen is mainly explained by the loss of consistency in U.S. dollar strength, as well as the stability observed in Japanese bond yields, which have acted as key catalysts supporting demand for the yen in the short term. If this dynamic persists, selling pressure could continue to dominate USD/JPY price action in the coming sessions.

Japanese bonds show stability

Despite the lack of recent updates from both the Japanese government and the Bank of Japan, 10-year Japanese bond yields have shown consistent stability. The yield currently remains above 2.21%, and although it has not returned to the recent high near 2.3%, it continues to trade at elevated levels compared to much of 2025.

This behavior suggests that the previous upward move in yields remains intact and that Japan’s fixed-income market retains a certain level of attractiveness. If this stability continues, it could encourage capital flows that support demand for the yen in the short term.

Source: TradingEconomics

In contrast, U.S. 10-year Treasury yields are showing a different dynamic. The yield has pulled back toward the 4.00% area, moving away from the recent high near 4.3%. In fact, levels similar to—or even below—those seen in late 2025 are being observed again, reflecting a relative loss of attractiveness in the U.S. fixed-income market.

Source: TradingEconomics

This behavior is already being reflected in dollar strength. The DXY index has posted a mild recovery toward the 97-point area but remains well below recent highs near 99, confirming that the dollar continues to experience structural weakness in the short term.

Source: TradingEconomics

Overall, the divergence between falling U.S. yields and stable Japanese yields may continue to favor the yen. If this dynamic holds, USD/JPY could remain under selling pressure in the coming sessions.

 

USD/JPY Technical Outlook

Source: StoneX, Tradingview

• The uptrend remains intact, at least for now: Since April 2025, USD/JPY has maintained a well-defined upward trendline that has dominated price behavior for several months. However, recent selling pressure has begun to call the strength of this structure into question, as prices have attempted to break below the trendline in the short term. If bearish pressure consolidates and persists over the next few sessions, the current bullish formation could come under threat, potentially giving way to a more dominant bearish bias in the near term.
   

• RSI: The RSI remains below the neutral 50 level, indicating that average selling momentum over the past 14 sessions continues to dominate. As long as this behavior persists, downside pressure may continue to play a key role in USD/JPY’s daily chart.
   
• MACD: The MACD also shows a negative bias, with the histogram below the zero line. This reflects that short-term moving averages continue to signal meaningful selling pressure. If this dynamic persists, it could reinforce bearish dominance in upcoming sessions.
   

Key Levels:

• 156.076 – Key resistance: Aligned with the 50-period simple moving average. Price action returning to this level could reactivate buying pressure and extend the prevailing uptrend.
   
• 152.230 – Near-term barrier: A level defined by recent lows. A sustained break below this zone could threaten the upward trendline and consolidate a more dominant bearish bias.
   
• 150.596 – Main support: Aligned with the 200-period simple moving average. A move toward this area could invalidate the current bullish structure and open the door to a new short-term bearish phase.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25