USD/JPY Rally Pauses, Adjusts Ahead of Weekend Events
Since the start of October, USD/JPY has been rising rapidly, maintaining momentum this week and breaking above 153 yen. It has gained over 10 yen from the late-September low of 141.65 yen in about a month.
Drivers Behind Dollar Strength and Yen Weakness
Dollar Strength: Strong U.S. economic data has contributed significantly to the dollar’s rise. As a result, expectations for a 50bp rate cut by year-end have nearly disappeared, with some speculating that the Fed might leave rates unchanged. Additionally, with Trump reportedly leading in the November 5 presidential election, “Trump Trade” dollar buying has continued.
Yen Weakness: Prime Minister Ishiba’s cautious stance on rate hikes has been a major factor. Bank of Japan (BoJ) Governor Ueda echoed this view, emphasizing that there is still time before any policy tightening. With the Lower House election approaching this weekend, where the ruling coalition may lose its majority, the BoJ is unlikely to shift its policy stance.
USD/JPY Adjustment Phase
In the latter half of this week, U.S. bond yields leveled off, temporarily easing dollar strength. Comments from Finance Minister Kato, Deputy Chief Cabinet Secretary Aoki, and Vice Finance Minister Mimura on yen intervention also contributed to the adjustment. As a result, USD/JPY retreated from the 153 yen level to 151 yen.
The 200-day moving average at 151.42 yen currently acts as support. Whether USD/JPY will break below or hold this level remains a key focus. Nervous trading is expected in the upcoming overseas sessions.
Key Events and Economic Indicators Today
France: Consumer Confidence Index (October)
Germany: Ifo Business Climate Index (October) (Forecast: 85.6, Previous: 85.4)
Eurozone: M3 Money Supply (September)
Canada: Retail Sales (August)
US: Durable Goods Orders (Preliminary) (September) (Forecast: -1.0% MoM), University of Michigan Consumer Sentiment (Final) (October)
Scheduled remarks include the publication of eurozone consumer inflation expectations during the London session and a discussion by Boston Fed President Collins during the New York session. As U.S. financial officials enter the “blackout period” over the weekend, comments on monetary policy will be temporarily limited.
Strategy
With no standout news expected today, a range-bound market is likely to persist. The focus will be on market movements following the release of U.S. durable goods orders, guiding subsequent trading strategies.
