USD/JPY rises to three-month high as US dollar strengthens

The USD/JPY currency pair rose to a nearly three-month high, reaching 151.79, driven by a stronger US dollar and rising US Treasury yields. The US dollar’s strength was supported by favorable US macroeconomic data and continued demand for safe-haven assets ahead of the upcoming US elections.

Japan’s political landscape remains uncertain ahead of this weekend’s general elections. Early polls show the ruling Liberal Democratic Party could potentially lose its majority, raising concerns about political stability and the future direction of the Bank of Japan’s monetary policy. Such political uncertainty further reduces prospects for the Japanese yen to regain its strength against the strong US dollar.

The current situation suggests that the Bank of Japan is unlikely to intervene effectively under these conditions. Market expectations are that any attempts at intervention will be futile given the prevailing high demand for the dollar. The fate of the yen now largely depends on the outcome of the Japanese elections and the subsequent actions of the Bank of Japan, especially regarding decisions on interest rates.

Technical analysis of the USD/JPY pair

USD/JPY established a narrow consolidation range around 150.85 and moved higher, continuing towards the 152.52 target. Once this level is reached, there could be a potential corrective move back down towards 150.85, testing this level from above ahead of another likely rally to 152.72. The MACD indicator supports this bullish pattern, with its signal line well above zero and pointing sharply upward, indicating strong upward momentum.

On the hourly chart, the USD/JPY pair has developed a growth structure in the direction of 152.85. After reaching this level, a correction phase is expected to the level of 150.85 with an initial correction target at 151.70. The Stochastic Oscillator further highlights this potential pullback, with its signal line positioned above 80 but poised to fall towards 20, suggesting an imminent downside correction before further gains.