02.10.202612:15 Forex Analysis & Reviews: USD/JPY: price analysis and outlook. Tokyo inflation and intervention risk bolster JPY

The USD/JPY pair is trading slightly lower on Friday, below 158.00, while remaining close to the weekly high reached yesterday.

Today's data showed that consumer inflation in Tokyo accelerated in September. This factor, together with the Bank of Japan's "Summary of Opinions," which discussed the need for further rate increases to counteract loose financial conditions, supports the Japanese yen. In addition, traders remain on alert amid rumors of possible authorities' intervention to strengthen the yen, which also weighs on USD/JPY.

The pair's decline is, however, capped by strong bullish sentiment toward the US dollar. Expectations for a rate jump from the Federal Reserve in October have eased, as concerns about inflation driven by energy price volatility limit a pullback in US Treasury yields from multi-year highs. That dynamic, along with ongoing geopolitical uncertainty, supports the dollar as a safe-haven asset near highs not seen since March 2025 and may continue to contribute to upside in USD/JPY.

Traders should exercise caution and refrain from opening directional positions ahead of key US labor data due later in the North American session. The high profile nonfarm payrolls report will have a material impact on market expectations for Fed policy and, in turn, on dollar dynamics, providing a significant impulse for USD/JPY. Spot prices, nonetheless, have registered moderate gains for a third consecutive week.

From a technical perspective, the pair is attempting to hold above the 9-day EMA. Oscillators are mixed, signaling some market indecision, but the relative strength index is positive, indicating that bulls have the capacity to keep the pair at current levels. The next important resistance is the 200-day SMA; a clear breach of that level would hand control of the market to the bulls.