The USD/JPY pair has been trending higher and may accelerate its upward movement in the short term.
2026-01-12 13:17:31
The Japanese yen (JPY) rose slightly during Asian trading hours on Monday amid a generally weaker dollar, after the dollar hit a one-year high and the yen hit a one-year low.
Global risk sentiment came under renewed pressure, and escalating geopolitical tensions prompted some safe-haven flows into the yen, providing some support for it. Meanwhile, rising concerns about the Federal Reserve's independence put pressure on the dollar, thus pushing the USD/JPY pair back from its highs.
Geopolitical risks remain a significant variable influencing market sentiment. Trump stated that he is considering various options regarding the situation with Iran, including potential military action; Iran, in turn, warned that it would target US military bases in the Middle East should the US intervene.
Amid the escalating conflict between Russia and Ukraine, investor risk appetite has been suppressed, providing some buying support for the traditional safe-haven currency, the Japanese yen. However, the yen's rebound has been significantly limited by the combined effects of domestic and external uncertainties in Japan, weakening the market's willingness to make more aggressive long bets on the yen.
Japanese Prime Minister Sanae Takaichi may call a snap election for the House of Representatives in early February, and the uncertainty surrounding the political outlook has further dampened market confidence. On the monetary policy front, the lack of clear guidance on the specific timing of the Bank of Japan's next interest rate hike has also limited the yen's upside potential.
Despite Bank of Japan Governor Kazuo Ueda's reiteration last week that the bank would continue raising interest rates if the economy and inflation perform as expected, uncertainty remains regarding the pace of policy in the short term. In contrast, while the dollar came under pressure, its decline was also limited.
Federal Reserve Chairman Jerome Powell stated that the U.S. Department of Justice is threatening to bring criminal charges against him, and emphasized that the Fed's policy-making is based on the public interest. This statement sparked market concerns about the Fed's independence, causing the dollar to retreat from its recent highs.
The latest U.S. non-farm payroll data shows that only 50,000 jobs were added in December, lower than expected, but the unemployment rate fell to 4.4%, easing pessimism about the U.S. labor market.
The market has adjusted its expectations regarding the probability of a rate cut by the Federal Reserve at its January meeting, but overall, it still expects further rate cuts throughout the year. This contrasts with the Bank of Japan's stance, which leans towards further tightening of policy, and continues to provide support for the USD/JPY exchange rate in the medium term.
From a technical perspective, the USD/JPY pair maintains a bullish structure on the 4-hour chart. The price is trading above the 200-period moving average, indicating a continued upward trend in the medium term. The MACD indicator is above the zero line with the fast and slow lines maintaining a bullish alignment, suggesting strong momentum.
However, the RSI has risen to around 75, which is clearly in overbought territory, suggesting that the upside potential in the short term may be limited. If the exchange rate can hold above the 157 level, the overall bullish structure will continue; however, if it breaks below the 200-period moving average support, a technical pullback cannot be ruled out.
Editor's Note:
In summary, the yen's recent rebound is largely driven by a weaker dollar and a recovery in safe-haven demand, rather than a substantial improvement in fundamentals. Political uncertainty in Japan and the unclear pace of the Bank of Japan's policy continue to weigh on the yen's performance.
Ahead of the release of US CPI and PPI data, the USD/JPY pair may maintain a high-level consolidation pattern. In the short term, caution is needed regarding the risk of a pullback due to overbought conditions, but the overall trend has not yet shown clear signs of reversal.
Global risk sentiment came under renewed pressure, and escalating geopolitical tensions prompted some safe-haven flows into the yen, providing some support for it. Meanwhile, rising concerns about the Federal Reserve's independence put pressure on the dollar, thus pushing the USD/JPY pair back from its highs.
Geopolitical risks remain a significant variable influencing market sentiment. Trump stated that he is considering various options regarding the situation with Iran, including potential military action; Iran, in turn, warned that it would target US military bases in the Middle East should the US intervene.
Amid the escalating conflict between Russia and Ukraine, investor risk appetite has been suppressed, providing some buying support for the traditional safe-haven currency, the Japanese yen. However, the yen's rebound has been significantly limited by the combined effects of domestic and external uncertainties in Japan, weakening the market's willingness to make more aggressive long bets on the yen.
Japanese Prime Minister Sanae Takaichi may call a snap election for the House of Representatives in early February, and the uncertainty surrounding the political outlook has further dampened market confidence. On the monetary policy front, the lack of clear guidance on the specific timing of the Bank of Japan's next interest rate hike has also limited the yen's upside potential.
Despite Bank of Japan Governor Kazuo Ueda's reiteration last week that the bank would continue raising interest rates if the economy and inflation perform as expected, uncertainty remains regarding the pace of policy in the short term. In contrast, while the dollar came under pressure, its decline was also limited.
Federal Reserve Chairman Jerome Powell stated that the U.S. Department of Justice is threatening to bring criminal charges against him, and emphasized that the Fed's policy-making is based on the public interest. This statement sparked market concerns about the Fed's independence, causing the dollar to retreat from its recent highs.
The latest U.S. non-farm payroll data shows that only 50,000 jobs were added in December, lower than expected, but the unemployment rate fell to 4.4%, easing pessimism about the U.S. labor market.
The market has adjusted its expectations regarding the probability of a rate cut by the Federal Reserve at its January meeting, but overall, it still expects further rate cuts throughout the year. This contrasts with the Bank of Japan's stance, which leans towards further tightening of policy, and continues to provide support for the USD/JPY exchange rate in the medium term.
From a technical perspective, the USD/JPY pair maintains a bullish structure on the 4-hour chart. The price is trading above the 200-period moving average, indicating a continued upward trend in the medium term. The MACD indicator is above the zero line with the fast and slow lines maintaining a bullish alignment, suggesting strong momentum.
However, the RSI has risen to around 75, which is clearly in overbought territory, suggesting that the upside potential in the short term may be limited. If the exchange rate can hold above the 157 level, the overall bullish structure will continue; however, if it breaks below the 200-period moving average support, a technical pullback cannot be ruled out.
Editor's Note:
In summary, the yen's recent rebound is largely driven by a weaker dollar and a recovery in safe-haven demand, rather than a substantial improvement in fundamentals. Political uncertainty in Japan and the unclear pace of the Bank of Japan's policy continue to weigh on the yen's performance.
Ahead of the release of US CPI and PPI data, the USD/JPY pair may maintain a high-level consolidation pattern. In the short term, caution is needed regarding the risk of a pullback due to overbought conditions, but the overall trend has not yet shown clear signs of reversal.
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