The USD/JPY currency pair extended its losses for the second consecutive day, trading around 156.90 during European hours on Monday, reflecting a 0.18% decline on the day [1][2]. The pair is currently moving within a symmetrical triangle pattern, indicating a period of market consolidation with neither buyers nor sellers in control [1]. Technical indicators show a bearish near-term bias, as USD/JPY remains below both the nine- and 50-period Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) near 47, suggesting consolidative momentum rather than oversold conditions [1]. The FXS Fed Sentiment Index eased to 147.72, signaling a modest pullback in hawkish intensity but still remaining firmly above the neutral mark, reflecting continued hawkish communication from the Federal Reserve [1]. Fed’s Hammack emphasized the risk of an inflationary mindset and the need for policy to remain restrictive, indicating limited appetite for near-term easing in US Dollar policy [1].
On the Japanese side, Atsushi Mimura, Japan's top currency diplomat, reiterated concerns about excessive falls in the Yen and signaled his resolve to act against such moves, referencing the "very clear" message delivered by Tokyo and Washington last week [2]. When questioned about potential funding constraints limiting Japan's ability to intervene, Mimura stated, "I have absolutely no such concern" [2]. Despite these remarks, no major reaction was observed in the Japanese Yen, with the currency showing strength as USD/JPY traded lower [2].
Analysts at Rabobank highlighted the possibility of the Bank of Japan (BoJ) implementing another 25bps hike, which would mark the first back-to-back hike since 1989-90, following comments from former BoJ executive director Momma [1]. Market attention has increased regarding BoJ tightening risks, although the central bank is widely expected to wait until the end of October for its next policy move [1].
The technical outlook suggests that USD/JPY could rebound toward resistance levels at the nine-day EMA of 157.12 and the 50-day EMA of 158.03, with further resistance at the upper boundary of the symmetrical triangle around 159.10. A break above this level could revive bullish momentum and potentially target the nearly 40-year high of 163.99, last reached on July 23. On the downside, a sustained break below the triangle could expose the 11-month low of 152.10 [1].
CONCLUSION
USD/JPY is under pressure amid hawkish Fed signals and Japan's readiness to intervene against excessive Yen weakness. While technicals point to a consolidative phase, market participants are closely watching central bank policy signals and intervention risks. The medium-term outlook remains uncertain, with potential for volatility depending on future Fed and BoJ actions.