USD/JPY Price Forecast - Dollar to Yen Blasts Past 153.00 After 500-Pip Weekly Rally

USD/JPY Rockets to 153.00 as Dollar Strength Overpowers BoJ Caution and Political Shifts in Japan

The USD/JPY pair extended its powerful upward momentum this week, trading near 153.00, its highest level since February, driven by a combination of yen weakness, risk aversion, and unrelenting demand for the U.S. dollar. The pair has surged more than 500 pips in just one week, climbing from 148.20 to 152.84, as traders bet that Japan’s leadership transition under Sanae Takaichi will delay any immediate Bank of Japan (BoJ) tightening. The Japanese currency remains under severe pressure, down more than 3.5% so far this week, marking one of its sharpest weekly declines of 2025.

Dollar Demand Surges as Safe-Haven Flows Favour the Greenback

The rally in USD/JPY has been underpinned by a broad shift in investor sentiment toward the dollar amid political and fiscal instability across Asia and Europe. A leadership shake-up in Tokyo and a political crisis in France have both triggered capital outflows from the yen and the euro, redirecting global liquidity toward the U.S. market. Despite the Federal Reserve’s dovish tone and the ongoing U.S. government shutdown, the dollar index (DXY) remains firmly bid, holding above 107.50, underscoring investor conviction that the greenback remains the dominant safe haven.

FX strategists note that “impulsive momentum is likely to outweigh overbought conditions,” meaning the dollar’s surge may continue even as short-term indicators flash exhaustion signals. The Relative Strength Index (RSI) for USD/JPY has climbed above 78, suggesting overbought conditions, yet traders continue to target the 153.80 resistance zone, which UOB Group analysts identify as the next major level to watch.

Political Realignment in Japan Resets BoJ Expectations

The political rise of Sanae Takaichi, a long-time fiscal dove and ally of the late Shinzo Abe, has altered Japan’s monetary outlook overnight. Market participants now expect a renewed commitment to fiscal stimulus, reviving parts of Abenomics, which previously relied on aggressive government spending and prolonged monetary easing. This development has forced traders to push back expectations of the BoJ’s next rate hike, previously anticipated as early as October.

Key economic advisor Etsuro Honda hinted that the central bank might delay tightening until December, contingent on global stability. The resulting divergence between the BoJ’s slow pace and the Fed’s still-tight policy stance continues to drive the yield spread in favor of the U.S. dollar. As of today, the U.S.–Japan 10-year bond yield differential remains above 380 basis points, one of the widest in over a decade, reinforcing sustained demand for dollar-yen carry trades.

Fed Minutes Reinforce Dovish Policy but Fail to Shake Dollar Momentum

The release of the Federal Reserve’s September meeting minutes confirmed a 25-basis-point rate cut to a new range of 4.00–4.25%, citing labor market softening after weaker job data in July and August. Despite the dovish stance, the dollar gained ground as policymakers remained cautious about cutting too quickly. Most participants agreed that additional rate reductions could be warranted later in 2025 if unemployment pressures persist, but they emphasized maintaining long-term inflation expectations near 2%.

Several members noted that financial conditions were “not especially restrictive,” implying that even at 4%, policy remains relatively loose compared to historical norms. This perceived flexibility gave the market a reason to sustain dollar bids, particularly as Japanese policymakers hesitate to normalize policy.

Technical Structure Confirms Unbroken Weekly Uptrend in USD/JPY

Technically, the USD/JPY chart exhibits a clean upward trajectory. The pair decisively broke above the July high of 150.00, then surpassed the 100-week moving average at 149.67, confirming a bullish continuation pattern. The next key resistance level sits at 153.80, followed by the psychological barrier at 155.00, which has not been tested since 1990.

Momentum indicators remain extreme but consistent with a strong trend. The MACD histogram continues to print positive bars, confirming upside dominance. Near-term support lies at 151.80 and 151.30, while the major support level — now reclassified as “strong support” by UOB Group — stands at 150.50. A weekly close above 152.50 would signal continuation toward 155.00, whereas a fall below 150.50 would be required to shift bias toward neutral.

Yen Weakness Broad-Based Across Majors

The yen’s depreciation has not been limited to the U.S. dollar. It has fallen sharply against nearly every major currency this week, with the most pronounced losses against the Swiss franc (-0.47%), euro (-0.18%), and British pound (-0.18%). The yen’s weakness mirrors widening capital outflows as investors move funds into higher-yielding assets. Against commodity-linked currencies, the yen also slipped 0.51% versus the Australian dollar and 0.19% versus the New Zealand dollar, confirming that the sell-off extends beyond USD dominance.

This broad-based slide demonstrates the yen’s diminished appeal as a funding currency in times of global uncertainty — a stark reversal from its traditional safe-haven status. The market’s recalibration of Japanese monetary policy, combined with weak domestic inflation momentum, has left the currency exposed to carry traders seeking yield differentials in USD and AUD positions.