Since Japanese Prime Minister Takaichi took office and the market began speculating that the US Fed. will raise rates in 2026, the yen has been weakening. Major news sites have been promoting that the yen is at a 30-year high since 1990… Looking closely at the daily chart, USDJPY is still consolidating near the July 2024 high (around 162), not a confirmed breakout yet.

In the past 2 years, whenever the daily MACD showed divergence, USDJPY experienced a clear correction. Momentum has slowed, but the correction has yet to appear, as the market awaits a new catalyst…

What will the new catalyst be…?
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[1] Will the US Dollar Index strengthen again, breaking above 101.80? Two weeks ago, some investment banks reported three rate hikes this year. For the dollar to strengthen further, the market would need to speculate on more than three hikes by the Fed in 2026, which seems unlikely for now… Especially after the US/Iran situation eased, the chance of a reversal is higher…
[*] Will the Bank of Japan intervene again? According to the IMF, Japan is a currency free convertibility country, and the BOJ still has two chances to intervene before November. Referring to the last intervention effect, it only pushed a 500-point adjustment. If they intervene again, how many points can they push down? The market usually discounts the second intervention, so this time a 300-point adjustment? It is believed this time they must act more aggressively, using more foreign reserves to be effective 🤔?
[*] “Unknown” factors? Why say that 🤣 Just like the 2025 tariffs or the Iran situation earlier this year, these are items requiring careful planning. Planned items are known to some (based on market reactions over the past six months), but certainly not to general investors. I believe something will appear before the US midterm elections, so just wait…
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Currently, USDJPY can only continue narrow range trading at high levels. Without new news, the trading range is between 158(1) and 163, operating within a consolidating triangle. USDJPY must break below the 150-day moving average to see a deeper correction.

Of course, a breakout upwards cannot be ruled out. If selling pressure above 163 clears and market momentum increases, USDJPY will retest new highs with a target of 166.5.

Start preparing, are you ready?