The yen maintained a relatively strong trend amid concerns about intervention, but bullish momentum was insufficient.
2025-11-25 13:58:23
On Tuesday (November 25), the USD/JPY pair traded in a narrow range around 156.75. Japan's worrying fiscal situation and the uncertainty surrounding the Bank of Japan's tightening policy path jointly constrained aggressive bets by yen bulls. Furthermore, a recovery in market risk appetite may further limit the upside potential of the safe-haven yen. Meanwhile, divergent policy signals from Federal Reserve officials put pressure on the dollar, keeping it below its highs since late May.
However, market expectations of imminent intervention by Japanese authorities to curb the depreciation of their currency are supporting the yen. Traders are remaining on the sidelines, awaiting key US macroeconomic data to be released this week—primarily the Producer Price Index (PPI) and retail sales data to be released later on Tuesday—which will provide important guidance for positioning their next directional trades.
Japanese Finance Minister Satsuki Katayama issued her strongest warning to date last Friday, stating that she would "take necessary actions against excessive volatility and market disorder," clearly signaling intervention. Furthermore, a member of a key government advisory committee said last Sunday that Japan could proactively intervene in the foreign exchange market to mitigate the negative impact of the weak yen on the economy.
Japan's cabinet last week approved a massive 21.3 trillion yen economic stimulus package—the largest since the COVID-19 pandemic—exacerbating market concerns about a deterioration in Japan's fiscal situation. The cabinet plans to finance the package as early as November 28 through a supplementary budget, raising concerns about the supply of new government debt and briefly pushing yields on ultra-long-term Japanese government bonds to record highs.
Furthermore, data released last week showed that the Japanese economy contracted for the first time in the sixth quarter, which may force the Bank of Japan to postpone raising interest rates. However, Governor Kazuo Ueda left open the possibility of a rate hike in December and told parliament that a weaker yen could push up overall prices. Japan's inflation level has been above the central bank's 2% policy target for more than three years.
In contrast, Federal Reserve Governor Waller pointed out on Monday that current data indicates the U.S. job market remains weak enough to support another 25 basis point rate cut at the December policy meeting. Previously, New York Fed President Williams described the current policy as "moderately restrictive" last Friday and stated that the Fed could still cut rates in the near future.
The market reacted quickly, with bets now placing an 80% chance of an interest rate cut by the end of the Fed's two-day meeting in December. This expectation has curbed the dollar's recent rise to its late May high of 100.39, putting downward pressure on the dollar against the yen.
Investors are focused on the delayed release of U.S. producer price index and monthly retail sales data later on Tuesday, which will directly impact the dollar's performance and create short-term trading opportunities for the dollar against the yen.
From a technical perspective, traders may need to wait for a decisive break above the 157.00 level before considering establishing new long positions in USD/JPY. If the upward trend is confirmed, the exchange rate is expected to test the intermediate resistance zone of 157.45-157.50, and then challenge the ten-month high near 157.89 reached last week. If buying continues after breaking through the psychological level of 158.00, it will signal the start of a new breakout and open up further upside potential in the short term.
On the downside, any valid pullback to the 156.20-156.25 area may provide initial support. A break below this range would then test the 156.00 level; a breach of this level could see the price test the 155.40-155.45 intermediate support zone, followed by a test of the psychological level of 155.00. A deeper pullback is expected to find strong support at the 154.45-154.50 level, which has now turned from resistance to support; this level is likely to become a key pivot point and form a solid short-term bottom.
(USD/JPY 4-hour chart, source: FX678)
At 13:58 Beijing time, the US dollar was trading at 156.71/72 against the Japanese yen.
However, market expectations of imminent intervention by Japanese authorities to curb the depreciation of their currency are supporting the yen. Traders are remaining on the sidelines, awaiting key US macroeconomic data to be released this week—primarily the Producer Price Index (PPI) and retail sales data to be released later on Tuesday—which will provide important guidance for positioning their next directional trades.
Despite escalating concerns about intervention, the yen has struggled to find substantial buying support.
Japanese Finance Minister Satsuki Katayama issued her strongest warning to date last Friday, stating that she would "take necessary actions against excessive volatility and market disorder," clearly signaling intervention. Furthermore, a member of a key government advisory committee said last Sunday that Japan could proactively intervene in the foreign exchange market to mitigate the negative impact of the weak yen on the economy.
Japan's cabinet last week approved a massive 21.3 trillion yen economic stimulus package—the largest since the COVID-19 pandemic—exacerbating market concerns about a deterioration in Japan's fiscal situation. The cabinet plans to finance the package as early as November 28 through a supplementary budget, raising concerns about the supply of new government debt and briefly pushing yields on ultra-long-term Japanese government bonds to record highs.
Furthermore, data released last week showed that the Japanese economy contracted for the first time in the sixth quarter, which may force the Bank of Japan to postpone raising interest rates. However, Governor Kazuo Ueda left open the possibility of a rate hike in December and told parliament that a weaker yen could push up overall prices. Japan's inflation level has been above the central bank's 2% policy target for more than three years.
In contrast, Federal Reserve Governor Waller pointed out on Monday that current data indicates the U.S. job market remains weak enough to support another 25 basis point rate cut at the December policy meeting. Previously, New York Fed President Williams described the current policy as "moderately restrictive" last Friday and stated that the Fed could still cut rates in the near future.
The market reacted quickly, with bets now placing an 80% chance of an interest rate cut by the end of the Fed's two-day meeting in December. This expectation has curbed the dollar's recent rise to its late May high of 100.39, putting downward pressure on the dollar against the yen.
Investors are focused on the delayed release of U.S. producer price index and monthly retail sales data later on Tuesday, which will directly impact the dollar's performance and create short-term trading opportunities for the dollar against the yen.
The USD/JPY pair may find strong support in the 156.20-156.25 area and attract bargain hunters.
From a technical perspective, traders may need to wait for a decisive break above the 157.00 level before considering establishing new long positions in USD/JPY. If the upward trend is confirmed, the exchange rate is expected to test the intermediate resistance zone of 157.45-157.50, and then challenge the ten-month high near 157.89 reached last week. If buying continues after breaking through the psychological level of 158.00, it will signal the start of a new breakout and open up further upside potential in the short term.
On the downside, any valid pullback to the 156.20-156.25 area may provide initial support. A break below this range would then test the 156.00 level; a breach of this level could see the price test the 155.40-155.45 intermediate support zone, followed by a test of the psychological level of 155.00. A deeper pullback is expected to find strong support at the 154.45-154.50 level, which has now turned from resistance to support; this level is likely to become a key pivot point and form a solid short-term bottom.
(USD/JPY 4-hour chart, source: FX678)
At 13:58 Beijing time, the US dollar was trading at 156.71/72 against the Japanese yen.
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