The rebound in the US dollar accelerated the upward movement of the US dollar against the Japanese yen.
2026-01-14 16:16:58
The US dollar rose to around 159.45 against the Japanese yen (USD/JPY) in early European trading on Wednesday, a new high in a year and a half, before retreating. The yen was the weakest performing major currency overall, reflecting continued market concerns about the political and policy outlook for Japan.
Market unease over the Japanese political situation stems primarily from reports that Prime Minister Sanae Takaichi might dissolve the Diet early and trigger a general election. Takaichi is expected to formally announce her intention to dissolve parliament on Wednesday, paving the way for a new election.
Political uncertainty often undermines investor confidence in yen assets, becoming a significant factor contributing to the recent continued pressure on the yen.
At the same time, the market still has high expectations that Japan may adopt more accommodative monetary and fiscal policies this year, which further limits the room for the yen's rebound.
The yen continued to underperform major currencies due to a weakening of its safe-haven appeal and dovish policy expectations. As for the US dollar, overall US inflation data met expectations, supporting its continued strength.
Latest data shows that the US CPI rose 2.7% year-on-year in December, while core CPI rose 2.6% year-on-year, both in line with market forecasts. This reinforces market expectations that the Federal Reserve will maintain interest rates unchanged in the short term.
From a technical perspective, USD/JPY maintains a clear bullish structure overall, with the exchange rate continuing to trade within an upward trend channel and the moving averages remaining in a bullish alignment, indicating that the medium-term upward trend remains intact.
Recent candlestick patterns have consistently closed near previous highs, indicating that bullish sentiment is dominant. However, the high-level candlesticks have shown some contraction, suggesting that the momentum for further gains is beginning to slow. In terms of momentum indicators, the 14-week RSI has risen to 70.85 and entered overbought territory, indicating that the short-term upward trend is overheated and there is a possibility of a period of consolidation or high-level fluctuations, but no clear reversal signal has yet appeared.
Assuming the trend remains intact, pullbacks are more likely to be seen as bullish corrections rather than trend reversals. The key support level is the psychological level of 158.00. As long as this area is not effectively broken, USD/JPY will maintain an overall bullish bias, while the psychological level of 160 remains a significant resistance level.
Editor's Note:
Overall, the rise in the USD/JPY exchange rate is driven more by a combination of fundamental factors and policy expectations. Political uncertainty and expectations of further easing policies in Japan continue to weigh on the yen, while resilient US inflation provides support for the dollar.
However, from a technical perspective, USD/JPY is already at a high level and momentum indicators are overbought, increasing the risk of chasing the price higher in the short term. The future trend will depend heavily on developments in Japanese politics and policy signals from the Federal Reserve. Without new catalysts, the exchange rate is more likely to enter a period of high-level consolidation rather than a rapid, one-sided upward movement.
Market unease over the Japanese political situation stems primarily from reports that Prime Minister Sanae Takaichi might dissolve the Diet early and trigger a general election. Takaichi is expected to formally announce her intention to dissolve parliament on Wednesday, paving the way for a new election.
Political uncertainty often undermines investor confidence in yen assets, becoming a significant factor contributing to the recent continued pressure on the yen.
At the same time, the market still has high expectations that Japan may adopt more accommodative monetary and fiscal policies this year, which further limits the room for the yen's rebound.
The yen continued to underperform major currencies due to a weakening of its safe-haven appeal and dovish policy expectations. As for the US dollar, overall US inflation data met expectations, supporting its continued strength.
Latest data shows that the US CPI rose 2.7% year-on-year in December, while core CPI rose 2.6% year-on-year, both in line with market forecasts. This reinforces market expectations that the Federal Reserve will maintain interest rates unchanged in the short term.
From a technical perspective, USD/JPY maintains a clear bullish structure overall, with the exchange rate continuing to trade within an upward trend channel and the moving averages remaining in a bullish alignment, indicating that the medium-term upward trend remains intact.
Recent candlestick patterns have consistently closed near previous highs, indicating that bullish sentiment is dominant. However, the high-level candlesticks have shown some contraction, suggesting that the momentum for further gains is beginning to slow. In terms of momentum indicators, the 14-week RSI has risen to 70.85 and entered overbought territory, indicating that the short-term upward trend is overheated and there is a possibility of a period of consolidation or high-level fluctuations, but no clear reversal signal has yet appeared.
Assuming the trend remains intact, pullbacks are more likely to be seen as bullish corrections rather than trend reversals. The key support level is the psychological level of 158.00. As long as this area is not effectively broken, USD/JPY will maintain an overall bullish bias, while the psychological level of 160 remains a significant resistance level.
Editor's Note:
Overall, the rise in the USD/JPY exchange rate is driven more by a combination of fundamental factors and policy expectations. Political uncertainty and expectations of further easing policies in Japan continue to weigh on the yen, while resilient US inflation provides support for the dollar.
However, from a technical perspective, USD/JPY is already at a high level and momentum indicators are overbought, increasing the risk of chasing the price higher in the short term. The future trend will depend heavily on developments in Japanese politics and policy signals from the Federal Reserve. Without new catalysts, the exchange rate is more likely to enter a period of high-level consolidation rather than a rapid, one-sided upward movement.
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