The Japanese Yen (JPY) extends its decline against a broadly stronger US Dollar (USD) for the fourth consecutive session, pushing USD/JPY to a nearly two-week high around the 157.30 area during Asian trading hours on Monday. Despite the Bank of Japan’s relatively hawkish policy stance, the absence of a clear timeline for further interest rate hikes continues to weigh on the Yen. At the same time, escalating geopolitical tensions are reinforcing demand for the USD as a global reserve currency, further contributing to the JPY’s underperformance.
That said, speculation over potential intervention by Japanese authorities to curb excessive currency weakness tempers aggressive bearish positioning on the Yen. In addition, expectations for lower US interest rates and renewed concerns surrounding the Federal Reserve’s independence may cap further USD gains, offering some support to the low-yielding JPY. This backdrop could limit upside momentum in USD/JPY as traders await key US macroeconomic data later this week for fresh direction.
USD/JPY technical outlook remains constructive above key support
From a technical perspective, USD/JPY continues to trade above the rising 200-period Simple Moving Average on the four-hour chart, reinforcing a bullish bias. The MACD remains above its signal line in positive territory, with the histogram gradually expanding, pointing to strengthening momentum. The 200-period SMA near 156.04 serves as immediate dynamic support.
The Relative Strength Index stands around 64.8, indicating bullish momentum without overbought conditions. As long as the pair holds above the rising 200-SMA, upside risks remain in play, while a sustained break below this level could shift the outlook toward consolidation.
Yen struggles amid BoJ uncertainty and firm US dollar
The Bank of Japan raised its benchmark policy rate to a 30-year high of 0.75% in December and signaled that future adjustments would remain data-dependent. Sources familiar with the matter suggest that the BoJ may begin more concrete discussions on an additional rate hike if solid wage growth is confirmed during this year’s spring shunto negotiations.
However, investors remain unconvinced about the pace of further tightening, amid expectations that energy subsidies, stable rice prices, and subdued petroleum costs could keep inflation contained well into 2026. This uncertainty continues to undermine the Yen, which, combined with a firmer US Dollar, has lifted USD/JPY above the 157.00 handle at the start of the week.
Geopolitical tensions support the greenback
Geopolitical risks remain elevated following reports that the US Army’s elite Delta Force carried out an operation in Venezuela over the weekend, capturing President Nicolás Maduro and his wife. These developments add to ongoing concerns surrounding the stalled Russia–Ukraine peace process, unrest in Iran, and persistent tensions in Gaza. Together, they underpin demand for the USD and reinforce its safe-haven appeal.
The US Dollar has climbed to a two-week high, although upside momentum appears limited by expectations that the Federal Reserve could begin cutting interest rates as early as March, with the possibility of an additional cut later in the year. Moreover, concerns about the Fed’s independence under President Donald Trump’s administration may act as a further headwind for the greenback, potentially restraining gains in USD/JPY.
Fed–BoJ policy divergence and intervention risks in focus
While dovish Fed expectations contrast with prospects for gradual policy normalization by the BoJ, speculation over currency intervention is likely to limit deeper losses in the Yen. As a result, caution is warranted before positioning for an extended bullish run in USD/JPY, despite the prevailing upward bias.
Market participants now turn their attention to a packed US economic calendar. The week begins with the release of the ISM Manufacturing PMI later on Monday and culminates with Friday’s closely watched Nonfarm Payrolls report, both of which are expected to provide clearer signals on the Fed’s rate-cut trajectory.
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