The US Dollar is slowly recovering from its recent lows against the Japanese Yen, but it is still below 151.40, keeping a bearish trend intact. Ongoing tensions between the US and China are hindering the Dollar’s recovery against safe-haven currencies like the Yen. Currently, the Japanese Yen is not taking advantage of the Dollar’s weakness. Political instability in Japan, caused by the Komeito party leaving the ruling coalition, makes it less likely for Sanae Takaichi to become Prime Minister anytime soon.

Technical Outlook For USD/JPY

From a technical perspective, the USD/JPY pair shows a weak recovery in the Dollar. The Relative Strength Index on the 4-hour chart is below the important 50 level, which is limiting any upward movement past 151.40. If the pair fails to break above 151.40, it may retest the 150.50 level. Below that, support can be found at 150.00 and 149.70. If it rises above 151.40, resistance may be encountered at 151.90 and possibly 152.60. A heat map illustrates the US Dollar’s performance against major currencies today, showing the Dollar is performing best against the Yen. The accompanying table displays percentage changes, highlighting the strengths and weaknesses of various currencies. The US Dollar is having difficulty surpassing the 151.40 level against the Japanese Yen, which keeps the pair in a short-term downward trend. Rising tensions between the US and China over new trade tariffs are making traders cautious, reducing the Dollar’s attractiveness. Recent data shows that bilateral trade forecasts for the last quarter of 2025 have been revised down by 5%.

Political Challenges In Japan

However, the Japanese Yen isn’t benefiting from the Dollar’s struggles due to political unrest domestically. The current instability within the ruling coalition is leading to uncertainty about the future of the Bank of Japan’s monetary policy. We’ve seen similar political turmoil in Japan during the late 2000s, which typically resulted in policy paralysis and a weaker Yen. Also, US inflation data from September 2025 shows that core inflation is steadily at 3.1%. This makes it unlikely that the Federal Reserve will lower interest rates soon. This underlying strength gives the Dollar a solid base, creating tension between weak short-term sentiment and strong long-term support. This conflicting situation suggests the USD/JPY pair could remain range-bound for the coming weeks. For those trading derivatives, this environment of high uncertainty and conflicting factors is driving option prices higher. Implied volatility for USD/JPY options has increased by over 15% in the past month, making strategies like long straddles or strangles appealing. These positions could profit from significant price swings in either direction when either political or economic pressures ease. Bearish traders should keep a close eye on the 150.50 support level. A drop below this could lead to a move towards the key psychological level of 150.00. Buying put options with a strike price below 150.00 may be a wise strategy to prepare for a possible breakdown. On the other hand, those with a bullish outlook should be patient for a clear break and sustained hold above the 151.40 resistance. If this happens, it would negate the near-term bearish outlook and open the way for a quick move toward the highs seen on October 14. In this case, call options with a strike around 152.00 could be a good way to take advantage of renewed upward momentum. Create your live VT Markets account and start trading now.

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