USD/JPY Price Forecast: Yen Strength Turns 152 into a Make-or-Break Level

USD/JPY – Price, positioning and what the market is really discounting

USD/JPY trades just below the 153 handle, around 152.8–152.9, after slipping from an intraday high near 153.8 and logging a weekly loss close to 2.7%. The pair is backing away from the 154–155 zone that capped price action earlier and is now leaning on the thick support band clustered around 152. Behind that move, US inflation has cooled further while the market quietly increases the amount of Fed easing priced for 2026 to roughly 61 bps, up from about 58 bps before the latest CPI release. Headline US CPI rose only 0.2% month-on-month in January and slowed to 2.4% year-on-year, down from 2.7%, while core inflation held near 2.5% y/y with a 0.3% monthly print. Those numbers keep the “cut cycle coming, but not collapsing growth” narrative alive and leave the dollar under pressure on rallies rather than in a broad bull trend, which feeds directly into how USD/JPY trades around the 152–155 band.

USD/JPY – Japan’s election, fiscal reset and why the 2s30s curve suddenly drives FX

The key shift on the yen side is no longer purely BoJ policy; it is Japan’s fiscal story and how it reshapes the JGB curve. The recent election delivered a decisive win for Sanae Takaichi, removing the pre-election fear of an open-ended, populist fiscal blow-out and permanent cuts to the 8% food sales tax. Post-vote messaging has stressed that any consumption-tax relief will be temporary and potentially partly funded by drawing on gains inside Japan’s roughly $1.4 trillion FX-reserve stockpile instead of a big jump in new JGB issuance. That immediately eased worries about a structural steepening of the long end of the curve and triggered an aggressive bull-flattening in the 2s30s segment. The spread has compressed by more than 50 bps from the highs as term premium in the long bond sector deflates. Over the last week the correlation between USD/JPY and the shape of that 2s30s curve has surged to roughly 0.88 on a five-day basis and around 0.55 on a 20-day window, meaning the pair is now trading more off JGB curve dynamics than off headline US data in the very short term. With Japan’s finance team signalling that the debt-to-GDP ratio is expected to improve and markets stabilising after the initial tax-cut shock, every further flattening step on the curve tends to translate into additional upside pressure on the yen relative to the dollar.

USD/JPY – Policy normalisation in Tokyo versus a tired dollar in Washington

On monetary policy, the gap is still wide but the direction has shifted subtlety in favour of the yen. In Japan, BoJ officials are now openly talking about a path of gradual rate increases “in line with improvements in the economy and prices,” while stressing they will avoid both premature tightening and an uncontrolled inflation overshoot. That is code for staying cautious, but it is no longer the “rates at zero forever” stance that supported the classic yen-funded carry trade for years. In the US, by contrast, all of the latest labour and spending signals point to a softer growth pulse. Retail sales missed with flat readings on both headline and core measures, prior labour indicators weakened, and the upcoming nonfarm payrolls release is expected to show only around 66,000 jobs added after 50,000 previously. Markets already price roughly two rate cuts into the curve despite reasonably solid GDP, which keeps US yields capped and chips away at the dollar’s yield advantage. That combination – Japan edging slowly toward normalisation while the Fed edges toward easing – does not yet collapse USD/JPY, but it does blunt the upside and leaves the pair vulnerable whenever risk sentiment wobbles or yen demand rises on domestic news.

USD/JPY – Carry trades, equity correlations and the risk of another violent unwind

The other big driver now sitting under USD/JPY is positioning. For years, the pair has been the core leg of global carry strategies: borrow in yen at near-zero cost, buy higher-yielding or risk assets in dollars and elsewhere, and clip the spread. That structure is now under more stress. Short-term funding costs in Japan are drifting higher, the yen has started to firm, and some of the favourite risk assets – from cryptocurrencies and precious metals to large US technology names – have started to lose momentum or trade more erratically. Recent correlation work shows USD/JPY has been moving almost lock-step with Nasdaq futures on a one-week view, with a correlation near 0.78, and inversely with equity volatility, with a roughly –0.92 relationship to volatility futures. When equities stumble and volatility spikes, the same de-risking flows that hit tech and crypto hit yen-funded carry positions, forcing traders to buy back yen and sell dollar legs. The last time the structure came under similar pressure, in August 2024, the pair dropped more than 10 big figures in a short window after a weaker-than-expected payrolls report. Positioning is less one-sided now than at that peak, but the mechanics have not changed: if asset prices roll over hard, the unwind of leveraged yen shorts can accelerate quickly and push USD/JPY sharply lower, especially once key chart levels break.

USD/JPY – CPI at 2.4%, softer dollar reaction and why US data is no longer the only story

The latest US CPI release underlines how the market’s reaction function has shifted. Headline inflation slowing to 2.4% y/y with a 0.2% m/m gain, and core CPI stuck around 2.5% y/y, would have been a major positive surprise a year ago. Today, the move in USD/JPY was more muted: the pair spiked toward 153.8 initially but then faded as traders sold the dollar into strength, taking the rate back under 153 and leaving it near 152.85 by the end of the session. The reason is that macro traders have become better at front-running the core PCE deflator and other Fed-relevant inflation gauges using CPI and PPI ahead of time, so there are fewer genuine shocks left in the data. Market pricing already assumed the Fed would cut; the CPI release simply nudged the priced amount of easing from about 58 to 61 bps, not a regime change. As long as US inflation drifts down without collapsing growth, the dollar tends to be sold on rallies rather than re-rated aggressively higher, especially against a currency like the yen that now has its own domestic support from curve moves and political clarity.

USD/JPY – Technical structure: heavy momentum, fading bounces and a 152 battleground

Technically, USD/JPY is not trading like a pair in the early stages of a new uptrend. On the weekly chart, the latest candle printed a large bearish key reversal – a wide-range bar that took out prior highs and then closed near the lows – signalling that sellers have become more aggressive after the prior failed bullish engulfing pattern. On the daily timeframe, momentum gauges confirm the turn. The 14-day RSI has rolled over below the 50 line but is not yet oversold, leaving room for further downside. MACD has already made a bearish crossover and continues to push lower. The last two daily candles show long upper shadows, which tells you that spikes above the mid-153s are being used to add shorts rather than to build fresh longs. The first band of resistance sits around 153.5–153.8 where recent rallies died, with a stronger resistance zone between roughly 154.5 and 155.0, an area that previously acted as support and now caps any squeeze higher. On the downside, the cluster between about 152.0 and 152.2 is the real battleground. That band combines January swing lows, trendline support dating back to the sharp risk-off episode in April 2025 and the market’s psychological focus on 152 as the level the authorities defended in the past. Below 152, attention shifts quickly to the 200-day moving average around 150.4 and the round 150.0 handle. A clean daily and weekly close under 152 would not only break the trendline but also send a strong signal to carry traders that the path of least resistance has turned firmly lower.

USD/JPY – Trading stance: bias to sell rallies, cautiously bearish while 152 is exposed

Putting the macro and technical pieces together, USD/JPY sits on fragile footing. Japan’s election outcome and the subsequent bull-flattening of the 2s30s curve have removed a major bearish overhang from the JGB market and simultaneously strengthened the yen. The BoJ is still ultra-cautious but no longer stuck in permanent emergency mode, which trims the attractiveness of funding carry trades in yen just as US data erodes confidence in the dollar’s yield premium. On the chart, price is respecting lower highs, momentum is negative, and the pair is pressing against a multi-month support area that has already been tested once. In that context, the more rational stance is to treat USD/JPY as a sell-on-strength market rather than something to buy on dips. Rallies toward 153.5–154.5 are more likely to attract supply than to break into a fresh leg higher unless US data or US yields surprise significantly to the upside. As long as the pair trades below the 50-day moving average and fails to reclaim the 154.5–155.0 zone, the bias stays bearish with 152.0 as the pivot. A decisive break under 152, confirmed on a daily and then weekly close, would open the door toward the 150–150.5 region and raise the risk of a sharper carry-trade unwind if risk assets sell off at the same time. On the other hand, a sustained recovery back above 155.0 and then 156.0 would force a reassessment of the downside case. Until that happens, the weight of the evidence argues for a Sell stance on USD/JPY, using strength into resistance to build positions and treating the 152 area as the line that, once lost, can trigger a deeper bearish extension.

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