The Japanese Yen (JPY) is still weak against the strong US Dollar (USD) as we enter the early European session on Monday. It is close to a nine-month low reached last week. Japan’s economy shrank by 0.4% from July to September, marking its first decline in six quarters. This disappointing data makes it less likely for the Bank of Japan (BoJ) to raise interest rates. On the other hand, the US Dollar is benefiting from lower expectations for a rate cut by the US Federal Reserve in December, keeping the USD/JPY pair above the 154.45-154.50 level. Concerns about possible Japanese government actions to support the Yen and geopolitical tensions with China may help limit JPY losses. Japanese officials have warned about currency fluctuations, making aggressive selling of the Yen less likely. Important upcoming events, such as the US nonfarm payrolls report and FOMC meeting minutes, could affect future USD/JPY movements.

Technical Overview

Technically, the USD/JPY pair looks set for gains above the 155.00 level if momentum continues. However, if it falls below the 154.00 support, new buyers may emerge around the 153.60-153.50 area. The USD is the most traded currency globally, and its value is influenced by US Federal Reserve policy decisions related to interest rates. Factors like quantitative easing and qualitative tightening also impact its worth. As of November 17, 2025, the split in policies between the US and Japan favors a stronger dollar against the yen. Japan’s economy has contracted for the first time in six quarters, shrinking by 0.4% in the third quarter. This weak data, along with Prime Minister Takaichi’s call for more stimulus, suggests the Bank of Japan is unlikely to raise interest rates soon. This dovish outlook is further confirmed by Japan’s latest inflation data. The Tokyo Core CPI, which predicts national prices, recently dropped to 2.5% in October 2025, down from over 4% in 2023. This decrease in price pressure allows the Bank of Japan to keep its ultra-loose monetary policy, putting additional strain on the yen. This environment makes shorting the JPY an appealing strategy. Meanwhile, the US Federal Reserve seems steadfast, reducing the likelihood of another rate cut in December. Recent US inflation data showed the Consumer Price Index at a stickier-than-expected 3.4%, giving policymakers pause. This interest rate gap is a significant factor keeping the USD/JPY pair high.

Watch for Intervention Risks

However, we need to be careful as the USD/JPY pair nears the 155.00 level. Remember that Japanese authorities intervened in the market to strengthen the yen when the pair exceeded 151.00 in late 2022. Recent warnings from Finance Minister Katayama suggest the risk of intervention is now very high. For traders using derivatives, taking long positions in USD/JPY futures could be risky due to the potential for a sudden drop. A more prudent strategy would be to buy USD/JPY call options to benefit from potential upside while clearly defining your maximum loss. This approach protects you if the Ministry of Finance decides to take action and sell dollars. Everyone should now pay close attention to the delayed US Nonfarm Payrolls report for October, which will be released this week. This will be the first significant data point reflecting the economic effects of the recent long government shutdown. A much weaker-than-expected result could quickly shift sentiment against the dollar and lead to a sell-off in USD/JPY. On the technical side, keep an eye on the key level of 153.00. A significant break below this point would indicate that bullish momentum has weakened and could shift the near-term bias to bearish. Until then, the strategy is to look for buying opportunities on dips, while being cautious about the exit. Create your live VT Markets account and start trading now.

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